Co-op Board Apartment Buyouts Are Feasible but Rare

A shareholder in a Queens co-op has a problem and a question. The problem: leaky pipes beneath the unit's floor have burst and leaked hot air, forcing the shareholder to vacate the apartment twice while repairs were made. The question: can this unhappy shareholder ask the co-op board to buy out the shares so the shareholder can move out?

It's certainly possible for a shareholder to ask a co-op board to buy her out, but it's unlikely the board will agree, Brick Underground reports. It's also unlikely the board will offer a price that's acceptable to the shareholder. 

“Buyouts are inherently hard to get effected because most co-ops are not interested in holding ownership over an apartment,” says Dean Roberts, a member at the law firm Norris McLaughlin. “By definition, it is going to create a gap in what the co-op thinks the apartment is worth and what the shareholder thinks it is worth.”

It is extremely rare for a shareholder to negotiate a buyout, Roberts adds. In his more than 30 years in law, he has worked on just two cases where a resident requested that their board purchase the unit. Typically, a co-op board would rather fix the maintenance problem than purchase the apartment, especially because they’d have to repair the unit if they wanted to rent it out or sell it anyway.

Plus, the board would have to justify its purchase to the rest of the co-op, and figure out how to pay for it, Roberts says. While the board could take out a line of credit or dip into their reserve funds, doing so wouldn’t make much financial sense unless the shareholder was willing to sell the unit at a very low price.

“Buyouts are hard to negotiate," he notes, "because it’s tough to find an agreeable price and tough to figure out how to pay that price."

One option is to threaten to sue. The shareholder could argue that the damaged pipes are so intolerable that she was essentially forced out of the apartment, something termed a constructive eviction. However, the apartment must be “genuinely unusable” for that argument to hold up in court, Roberts says. “Constructive eviction [is] a high standard,” he says. “If there’s a foot of water in the apartment and the pipes blow out every week, then you could make it, as opposed to the corner of the dining room floor that has a stained tile.”

It’s best to consult with an attorney before considering this course of action, says Bruce Cholst, a partner at the law firm Herrick Feinstein. That attorney could then send a letter to the board laying out the maintenance problem, stating that you intend to sue, and give them a deadline to respond. 

If you move forward with this plan, you should be prepared to follow through on your threat, Cholst adds. Litigation is a time-consuming, expensive and extreme option — the nuclear option. So no shareholder should make this decision lightly.