Gas Shutdown Can Kill Co-op Apartment Sales

When micro-leaks in gas risers were discovered at a Yorkville co-op, Con Edison shut down gas service to the entire building. That was four months ago. The shutdown will continue until leaks are fixed in all affected risers and pressure-testing is conducted to ascertain that there are no more leaks. A couple in an apartment line that has no leaks is thinking about putting their apartment on the market. They have two questions. Will prospective buyers have trouble securing a mortgage while the gas is shut down? Is it even possible to sell an apartment during a gas shutdown?

“If there’s a gas leak in a building, you may just be out of luck,” Bill Kowalczuk, an associate real estate broker at Warburg Realty, tells the Ask Real Estate column in the New York Times. “What buyer would want to buy?” 

There are numerous other hurdles, including today’s soft housing market and the certainty that a prospective purchaser’s lender will send an appraiser to look over the property. “The appraiser will almost certainly notify the bank of this issue,” says Pierre Debbas, a managing partner at the law firm Romer Debbas, and it’s unlikely the bank would fund the loan because it is not going to want to lend money in a building with problems of this magnitude. 

The couple could list its apartment at a steep discount in an effort to lure a buyer, but even that strategy might run into a wall if the co-op board deems the price is too low and, fearing it will depress values building-wide, rejects the sale. Such a move is very much within a co-op board’s authority. 

What if the buyer offers to pay cash? If the buyer’s lawyer is competent, he or she will do due diligence and read through the board minutes, thereby uncovering the scale of this problem and advising the client of the risks. Who wants to buy an apartment that could be without gas for a year or more?