“Held hostage” by “price-fixing,” owners sue their co-op
Couple alleges buyers were rejected because board deemed sale price too low
Two residents allege they’re being “held hostage” in their Lower East Side co-op by a “price fixing” scheme.
Eleanor Stromberg and Douglas Price, 22-year residents of 577 Grand Street, twice had sales of their unit fall through. Now they have filed a lawsuit against their co-op, co-op board and board vice president Shulie Wollman, alleging the board is demanding the couple get an unreasonably high price.
The elderly couple want to move somewhere where Price’s health care needs can be more readily met, according to their lawyer, Lee Bergstein, but the board has “eradicated” the market for their home.
“What’s happening in the building, it’s just not right,” said Bergstein.
A first buyer offered $520,000 for Stromberg’s unit, in line with comparable sales, which ranged from $514,500 to $528,000, and the unit’s $525,000 appraisal.
The lawsuit claims the board rejected the application without following its bylaws and told Stromberg’s broker the deal had been rejected because of the “low” purchase price.
The buyer agreed to a second contract for $540,000, only for the board to allegedly deny the deal again, at which point the broker was informed the board wouldn’t accept anything under $600,000 — 15 percent more than the appraised value.
When Stromberg and Price asked Wollman about the denial, he allegedly told them they should be happy about the policy because they would get more money for their apartment.
But the unit languished on the market for a year after the second rejection, leading the owners to believe they wouldn’t be able to find a buyer at $600,000.
In April, they found a buyer willing to pay $620,000 in exchange for $100,000 in sellers’ concessions, according to Bergstein.
The board rejected that deal too, which Bergstein said appears to be retaliation against his clients for suing — and that the board won’t approve any deal until the complaint is dropped.
Wollman, who is also an executive for the company that manages the building, did not return a request for comment.
Sellers’ concessions are a tool brokers use to close deals when co-op boards set above-market minimum prices, a common practice in New York City to support higher pricing for future sales in a building. To compensate buyers for paying an inflated sticker price, sellers give rebates and credits or assume tax burdens they otherwise wouldn’t pay.
The puffed-up price is then recorded in city records.
“This is not a multimillion dollar lawsuit but we feel it’s an important one.”
Critics say the practice unduly burdens sellers and throws off future comps at a time when interest in co-ops is waning to begin with.
The chicanery is possible because co-op boards can deny buyers for any reason without explanation. Brokers say boards are usually coy when they make it known the rejection was because of the price.
“We’ve all had that experience, but it’s never put in writing, ever,” Compass broker Vickey Barron previously told The Real Deal.
According to the lawsuit, the board at 577 Grand Street made that very mistake.
Besides telling Stromberg and Price why the board rejected their first two contracts, the board has told several other shareholders in the building a similar story about their rejections, including in denial emails in which they cited the “proposed sale price of the apartment,” the lawsuit claims.
“The board has rejected seven packages based on numbers. …It’s not being rejected based on the person, it’s based on the numbers,” Wollman allegedly told a different shareholder, according to the complaint.
Elliot Caplan, assistant general manager and manager of sales for the management firm, told the same shareholder that “the board decided at its last meeting that it’s no longer going to accept the lower prices on the apartments, despite what the market says. … They decided that they want to hold out and they’re going to … push and insist on the prices being higher,” according to the suit.
Bergstein said he’s optimistic about the lawsuit’s chances, citing previous case rulings in New York that found that setting a minimum price for a unit is an unreasonable restraint on shareholders.
“This is not a multimillion dollar lawsuit but we feel it’s an important one,” said Bergstein. “Our hope is this suit will be productive for other shareholders in the building facing similar situations.”