“Meet The New Boss, Same As The Old Boss”
don’t get fooled again
Recently, there have been some proposals to bring transparency to the coop purchase process. Boards would have to give reasons as to why they rejected a buyer. You can read about it
here.
I am for transparency. I’ve seen some nasty stuff in the past twenty years, including
racism. I’ve seen boards reject a buyer because she was a single mother, too. And even in the last few years, I have seen Jewish buyers rejected because of their religion. Gross, on all counts. And very hard to prove.
I don’t know that the proposals will solve for this behavior. Boards will find creative ways to reject buyers for personal reasons such as these, even if they have to disclose more information.
However, where I think some real progress could be made is around boards rejecting deals because they don’t like the price. Cooperatives are participating in what I would consider to be fraudulent and unethical behavior, as they try to keep their prices higher. I wrote about it in 2019; you can read about it
here.
An example of what happens: Let’s take a property might be worth $2mm. But a building wants to see it sell for $2.4mm, 20% higher than it’s worth. In practice, the contract of sale might read $2.4mm, but in a rider, the seller gives the buyer a $400,000 credit. The effective price is $2mm, but the public doesn’t know it. It’s misleading, to say the least. At worst, it’s out and out financial fraud.
A Solution For Fraud
The easiest way that New York City could stop this behavior cold is to require all sales contracts to be filed with the city. Every page, every rider, etc. With strict penalties for any omissions, including disbarment of attorneys. If attorneys demand transparency, the game would be over. What would happen is that the current practice would end. No more shenanigans, hiding the actual price in a rider to the contract. The real price would be made public. As much as coops would not like this transparency, they could not go on forever rejecting buyers based on the price alone. There would be litigation to stop that, too.
Over Time
I suspect that over time, coops would begin to get used to publishing their requirements, and it would make the process far less opaque. Perhaps we won’t solve the worst offenses, but we’ll make some actual progress- rather than the current proposed legislation, which, to my mind, has no teeth at all. -S