Asked and AnsweredWe are selling our apartment to our neighbor, but our neighbor can’t afford to purchase our apartment unless she sells her apartment. Her lawyer wants the contract to provide that the purchase of our apartment is contingent upon the sale of her apartment. Our lawyer is advising us against including a provision that makes the transaction contingent on the sale of the buyer’s apartment. Should we go along with the contingency?
In most cases, sales that are contingent on the sale of another property are a “no-no” and should be avoided. Particularly if the buyer is selling one co-op and buying another co-op, the seller has to worry about two Board approvals, which is geometrically more difficult that just one Board approval. Further, if the seller commits to purchase another property after the contract is signed and the buyer cancels the contract as a result of the inability to sell the buyer’s apartment, even more complications will arise. Every now and then, the circumstances will require flexibility on the part of a seller in order to find a buyer. Recently, I had a situation where the seller was an elderly lady who was selling a very expensive apartment and downsizing to a smaller apartment in the same building. The Board president had given believable signals that the Board would cooperate with the parties as the seller had lived in the building for over 50 years. With a green light from the Board, although the contract did not contain an actual contingency, the seller went ahead with the transaction because there was significant reason to believe that the buyer’s transaction would be approved. At the end of the day, both transactions were approved. The above being said, unless there is a very good reason, contracts should not include a contingency that allows the buyer to get out of the contract, if the buyer is unable to sell his or her current residence or another unrelated property.