In exercising their fiduciary duties, cooperative boards have a legitimate interest in maintaining the value of apartments in the building. However, rejecting a purchase application based on a low sales price may be at odds with the interests of a selling shareholder who wants to sell an apartment at an acceptable price to him or her.
This column updates one published in 2009 dealing with floor price as a basis for co-op board disapproval of an apartment sale.1 Based on then existing case law, our previous column recommended that boards should avoid using a floor price—a minimum transfer price—as a basis for rejection in order to prevent apartment transfers at below market prices. Instead, we suggested other methods to regulate sales-price, such as shareholder adoption of an option or right of first refusal, which would allow boards to purchase an apartment on behalf of the co-op and resell it at market value.2 If a board is nonetheless determined to impose a floor price, we recommended that it seek shareholder approval to do so and that the board’s right to set a floor price be incorporated into the co-op’s governing documents. But as we noted, there was still no guarantee that a price-based rejection would be insulated from challenge.
Potential Impact of Cases
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