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Our coop owns several units in the building (we got them when the sponsor defaulted in the 1980s). They are currently being sublet to rent regulated tenants. When units become available, we sell them. This periodic inflow of cash is great.
One of these units is under contract to sell. The time has come for the Board to review the application and interview the potential purchaser. Isn't it a conflict of interest for the Board to vote on his approval, because we inherently want the unit to sell? Or is it enough that we are balancing our interest to sell with our interest to have good paying tenants?
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YOUR QUESTIONS: Isn't it a conflict of interest for the Board to vote on his approval, because we inherently want the unit to sell? Or is it enough that we are balancing our interest to sell with our interest to have good paying tenants?
MY ANSWER: Boards should be motivated to review the sales of individual shareholders with the best intentions of accepting a sale so that the individual shareholder may continue with his/her life. However, this goodwill should be balanced by your responsibility to ensure that the potential buyer has the financial attributes and fulfills the occupancy expectations that you wish to see in a new shareholder.
In the case of the co-op selling the unit, I'm sure your board wishes to maximize the market value of the unit for the benefit of the corporation, but more important than obtaining the market price for the unit is to get an individual shareholder who meets the attributes that you expect to see if the unit were to be sold by an individual shareholder.
Again, money should not be the final consideration, but the potential shareholder's financial test and the other considerations that make the evaluation of an application. Finally, if the potential buyer is paying the right amount, but the board is not sure, the much talked escrow account in prior postings could also be added to the sale if additional attributes for the potential buyer are also met.
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