On this week's episode of Eye on Real Estate, January 18, 2020, we were asked about suing a cooperative board for refusing a sale by creating an absolute floor price, which unit owners had to obtain in order to sell units to third-party purchasers.
Initially, we discussed the business judgment rule, which generally protects boards from lawsuits as long as the board acted in good faith and in accordance with it's power.
However, there can be a case against the board where the board created an absolute floor price in bad faith or if the board created the absolute floor price beyond its powers as set forth in the bylaws.
As the courts explain, the test is whether the board's floor is "a provision merely postponing sale during the option period," which is permissible or, if it is, instead, "an effective prohibition against transferability itself," which is impermissible.
So, if you are being blocked on price, consider a lawsuit after you obtain and review the bylaws.
For a great explanation of this issue, see Oakley v. Longview Owners, Inc.
Initially, we discussed the business judgment rule, which generally protects boards from lawsuits as long as the board acted in good faith and in accordance with it's power.
However, there can be a case against the board where the board created an absolute floor price in bad faith or if the board created the absolute floor price beyond its powers as set forth in the bylaws.
As the courts explain, the test is whether the board's floor is "a provision merely postponing sale during the option period," which is permissible or, if it is, instead, "an effective prohibition against transferability itself," which is impermissible.
So, if you are being blocked on price, consider a lawsuit after you obtain and review the bylaws.
For a great explanation of this issue, see Oakley v. Longview Owners, Inc.
