Why Should I Offer to Put a Year's Worth of Maintenance in Escrow?

July 27, 2015 — I work in sales and my broker is suggesting that I offer to put a year's worth of maintenance in escrow to get board approval. Why?

A co-op's board of directors has a fiduciary responsibility to ensure that a potential buyer is solvent and able to pay maintenance, any assessments, and all just debts. The board will review a potential buyer's financials, such as income tax returns, bank and investment account statements, a statement of assets and liabilities, and an employer compensation verification letter.

When a potential buyer's salary is commission-based, the board can be concerned that the buyer may not be able to pay maintenance and any assessments because the buyer doesn't receive a regular paycheck. To alleviate this concern, brokers may recommend that the buyer offer to put a year's worth of maintenance in escrow. The escrow can be drawn down if the shareholder defaults on paying his/her maintenance and any assessments.

An escrow agreement is drawn up if the board approves the purchase on the condition of the buyer submitting escrow. I would recommend that potential buyers with commission-based salaries offer to put maintenance in escrow.

Cynthia Graffeo is director of client relations at Argo Management.