Can my co-op building fine me if my apartment sits unsold for too long?
I signed a Surrender and Transfer Agreement in order to buy a bigger apartment in my co-op building. My apartment has been on the market for six months, which triggered the agreement. Now I have to pay liquidated damages for each day the co-op remains unsold. If I refuse, the board will block the sale. Is there anything I can do?
Whether or not you can fight these daily charges depends on the terms of your agreement, our experts say.
When a co-op shareholder purchases a new apartment in the building before they sell their old one, a board will typically have some requirements for the sale. These conditions should be laid out clearly in your Surrender and Transfer Agreement.
"Liquidated damages are an agreed-upon amount to be paid in instances where it would be difficult to determine the cost or value of a contracting party’s potential losses," says Jeffrey Reich, a partner at the law firm of Schwartz Sladkus Reich Greenberg Atlas. "If included in a contract, a liquidated damages provision would generally be enforceable."
If you feel you've done everything you can to sell the apartment and have faced unusual challenges in doing so, you can try appealing to the board with a letter explaining the situation. The board may not agree with your assessment, leaving you in a tight spot.
"Ultimately, if the board does not take mercy on you, the board would likely be able to enforce the terms of the agreement," Reich says. "Read the agreement carefully to determine whether in addition to the right to collect liquidated damages, the board can also terminate your stock and lease for one or both of the your apartments," he says.
You may be able to end the situation by lowering your asking price. In today's fast-moving market, which generally favors sellers, you may be struggling to sell the old unit because buyers find your price is too high.
"This has been a strong market, and boards know this, so they may be thinking that you're not selling the apartment because the price is just simply too high," says Deanna Kory, a broker at Corcoran. "This is one way of getting you to lower the price. No matter what, you signed an agreement, and so my feeling is that you should go ahead and lower the price on the apartment and get it sold."
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