Asked and AnsweredWe submitted our Board package a month ago, but the Board has not scheduled an interview or asked for any additional information. To make matters worse, the managing agent won’t give us any indication as to what’s going on. Is there anything we can do?
For the most part, no. The Board process can be painfully protracted and can take inexplicable twists and turns. Although the standard co-op contract sets up a procedure for submission of the Board package, there is nothing the seller or buyer can do to compel the Board to make a decision on an application at a pace faster than the particular Board chooses to adopt. That being said, Paragraph 6.3 of the standard printed portion of the contract does provide the following remedy:
“…If the Corporation has not made a decision on or before the Scheduled Closing Date, the Closing shall be adjourned for 30 business days for the purpose of obtaining such consent. If such consent is not given by such adjourned date, either Party may cancel this Contract by Notice, provided that the Corporation’s consent is not issued before such Notice of cancellation is given…”
Having to wait an additional 30 business days from the scheduled closing date in order to cancel the contract will no doubt seem like an eternity, but at least there is a way out of the transaction if the Board is uncooperative. In most cases, however, the Board will finally make a decision before this time period elapses.
As the shareholder, the seller has standing to inquire about delays in processing a Board package. Nevertheless, there is a “walking on egg shells” quality to the Board approval environment and the parties and the brokers are always concerned about a buyer seeming pushy or aggressive. Rightfully so. Once the letter writing and litigation threats begin, when a Board appears to be acting in bad faith or is potentially violating the law in the case of alleged discriminatory behavior, there is almost always an unhappy ending. Forcing the Board to act should be a remedy that is carefully considered only when the parties have no other choice.
Once a party signs on to the Board approval process by deciding to purchase a co-op, one should accept the fact that the path to closing will probably take longer than expected. Cue the theme to “High Anxiety”.
For more on the Board approval process, see "How To Avoid a Board Turn Down."