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Is it legitimate to pull out of a deal (pre-contract) based on one's opinion of the frequency of maintenance increases?

Asked by Voices Member, Tue Apr 10, 2012

I am very disappointed to discover that the building I am hoping to buy into has had maintenance increases every year since 2004. This does not bode well for the future and I'd like to withdraw? Is that a legitimate reason or would I be acting in bad faith?

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Every building is different. Costs have gone up city wide. Building expenses and real estate taxes continue to rise. Different coops handle cost increases differently. Some raise maintenance every year, some have assessment's for every repair and maintenance, some have on-going assessments and some institute flip taxes (you pay the coop a percentage or flat fee or per share amount) when you sell.

Either way they all get you some way or another sooner or later. You need to determine how much has it gone up every year. Even rent stabilized apartments have an increase each year. Do you really like the apartment? Are there amenities worth paying for? Is the building well run? Is there an adequate reserve fund? will you have "quality of life" living there. Is the maintenance in line with comparable building? Some coops receive additional revenue other than maintenance from rental income on retail space in the building that the coop owns.

It is a decision that you have to make based on many variables.
2 votes Thank Flag Link Tue Apr 10, 2012
Mitchell Hall, Real Estate Pro in New York, NY
MVP'08
Contact
Sdtrendy,

You are under no obligation until you sign a contract and the seller counter signs. In fact, it is not only perfectly legitimate, it is your responsibility because the period between an accepted offer and contract signing in NY is the due diligence process.

During the due diligence process you and/or your attorney are supposed to read the building's financials, board meeting minutes and offering plan to discover any information that may or may not be a reason to move forward and sign the contract or to pull out.

Caveat Emptor "let the buyer beware" is a guiding principle in NY real property law. The seller makes no representation as to the condition of the building's financials. The onus is on the buyer to do their homework. It sounds like you have. Good Luck!

Best,

Mitchell Hall, Associate Broker
The Corcoran Group
917-312-0924
MHALL@corcoran.com
2 votes Thank Flag Link Tue Apr 10, 2012
Mitchell Hall, Real Estate Pro in New York, NY
MVP'08
Contact
Hello Trendy. If, as you say, you didn't sign athe contract if sale, it really doesn't matter what reason you have. You are under absolutely no obligation to go any further if you didn't sign.

My question to you is the following. Where did you find out about the yearly increases? I do hope it was through your Attorney. As your Attorney is required to do his due diligence on your behalf (going over the contract, the bldg's financials, etc.). Do you know if he/she went to see the managing agent to look at the minutes of the Coops' board meetings? Your Attorney has that option to see if there have been any discussion about upcoming raises to the maintenance. The Board meeting minutes would most likely have that info. A good Attorney will do that. A less good Attorney will not. Just a thought.
1 vote Thank Flag Link Tue Apr 10, 2012
If you are not in an executed contract, signed by all parties, you are free to walk away; what is your attorney advising...
1 vote Thank Flag Link Tue Apr 10, 2012
Actually, the contract has been with the seller's attorney for nearly 2 weeks.
Flag Tue Apr 10, 2012
Thanks. No contract has been signed, although we are in mid-negotiation of same. It has been with the seller's attorney for about a week.
I have not had a full discussion with my attorney yet, but I expect to do so today. I am ready to pull out because I would also not like to leave the seller hanging. I feel it incumbent upon me to make a decision right away.
All this would have been avoided if the seller's broker had answered my oft-reiterated questions about the maintenance history. If someone asks you something 4-5 times, you really should answer. I was forced to await the financials on the building and the minutes, so I feel somewhat justified in canceling the deal at this point. Just feel bad for the seller.
Flag Tue Apr 10, 2012
"Pre-contract" says it all. Of course you can bow out. However, if I were you, I would find out why there were increases and see if that makes sense to you. I am almost more suspicious when I don't see increases which would lead me to question whether the board is deferring maintenance to keep fees down. Also, check to see if a reserve study was completed and make sure that the building is funding their reserves properly.
0 votes Thank Flag Link Mon Apr 16, 2012
Yes, that is perfectly legitimate.

However, before making the final decision, you should have your attorney look into the reasons behind the annual increases. For example, it may actually be a sign that the coop is very pro-active and wants to make sure they have enough money to cover future repairs in the future (as opposed to being forced to impose large assessments), as well as stay up with general "cost of life" increases such as real estate taxes and insurance premiums.
0 votes Thank Flag Link Sun Apr 15, 2012
Of course! If you are unhappy with the maintenance increases in a condo or townhouse community, you can pullout. However, you may want to first review the condo association budget and monthly costs. Some associations will charge only the bare minimum and will raise the fees as needed. Other associations will raise the fee by a larger percentage of the existing fee; however, they'll do it less frequently.

You have to determine how much you wish to live at the place (how much you like it) and whether it is a good value based on the current maintenance costs and the strong possibility that the monthly association fees will continue to rise.

Therefore, you should look closely at the by-laws and the condo association budget, get legal advice from a qualified attorney and if you are not sure whether you can afford it with the rising maintenance costs, you probably ought to be seeking a less expensive property one with a smaller or more doable maintenance cost. Please realize that maintenance is only one of many factors. If you are tight on qualifying due to the maintenance costs on this condo, taxes or price on another similar property elsewhere could cause you the same affordability issues in the future. So, if the rising maintenance issues are a concern now, you may need to re-think your price range. Good luck with your move.
0 votes Thank Flag Link Sun Apr 15, 2012
Not sure about New York, but here in California, we have contingency periods and if you still within your "due dilignece" right to investigate, then there would be no problem. I have had clients cancel over a bad dream the night before. It does not seem unreasonable at all to cancel over community maintenance costs once you have been provided that information. But, if you love the property, try to get some insight as to why it is increasing annually... it could be that they are trying to build up reserves or it could just be poor management. Try to get to the bottom of it so that your decision will be an easier one. Good luck.
Sincerely,
Richard "RJ" Kas (SFR, SRES)
"Representing the finest properties from Los Angeles worldwide"
KAS Properties - Coldwell Banker Previews International - Beverly Hills South
166 N. Canon Dr, Beverly Hills, CA 90210
310.859-5334 office - 310.488.9826 mobile - 310-273-0690 fax ATT: RJ
RichardKas@gmail.com - http://www.RJforLA.com - DRE: 01352771
Sellers Buyers Investors Leasing Consulting
0 votes Thank Flag Link Sat Apr 14, 2012
Hi, you have to do what is right for you, you aren't bound to anything until you have fully executed contracts. This is a common problem with coops, they can pretty much do what they want.

Chris
0 votes Thank Flag Link Wed Apr 11, 2012
Sdtrendy,
If the contract has not been signed and you have not given your 10%, you may back out. In fact, the whole purpose of your attorney's due diligence is to look into issues such as the building's finances. If your attorney determines that the building's finances are not in good shape, that is a legitmate reason to change your mind. However, the fact that the maintenance has increased yearly in and of itself may not be a problem if it is not very high. You and your attorney should look at the maintenance in comparison to similar units in the neighborhood.

Best,
Jenet Levy
Halstead Property, LLC
jlevy@halstead.com
212 381-4268
http://jenetlevy.halstead.com for all NYC listings
0 votes Thank Flag Link Tue Apr 10, 2012
Thanks all of you for your excellent advice. I feel responsible for the seller's inconvenience, as it has taken longer for the contract to move to signing than either he or I would wish. Again, not that we had total control over that issue.

I just want to act in the best faith possible.
0 votes Thank Flag Link Tue Apr 10, 2012
Pre contract - you mean you have just made an offer??
An offer is not bindding until BOTH parties sign and becomes a contract.
After that also you have a period to do your own due delegience.
So i suugest contact your Realtor and also a legal attorney.
0 votes Thank Flag Link Tue Apr 10, 2012
I'm not from NY, but in FL the buyer has 3 days to review the condo docs and financials of the building, and if the buyer is not happy with anything re. the condominium, the buyer can exit the deal.
Is there something like that in NY?

Irina Karan
CDPE
IrinaKaran@gmail.com
Beachfront Realty, Inc.
0 votes Thank Flag Link Tue Apr 10, 2012
Yes. You can change your mind without penalty prior to entering a valid contract. Verify with your Attorney as this is not legal advice, and I am NOT an Attorney.
0 votes Thank Flag Link Tue Apr 10, 2012
If you are not in contract, you do not need a reason to back out. You are not comfortable with what you are purchasing...this is the time to get out.
0 votes Thank Flag Link Tue Apr 10, 2012
Of course. Until a contract has been executed, you are permitted to withdraw. However, this is best discussed with your attorney.

best,

Cynthia
917-721-4697
0 votes Thank Flag Link Tue Apr 10, 2012
If you are not in contract, you can decide not to sign for any reason. NYS law does not consider a verbal agreement binding so no need to worry.

Kelly Killian
Vice President
Bond New York
646-666-2261
954-675-9915
0 votes Thank Flag Link Tue Apr 10, 2012
Until contract is executed you can pull out

Barry M Salottolo
Licensed Real Estate Broker
Manhattan, Westchester, Connecticut
Cell: 914-310-2930
"Whatever you're thinking and feeling today
is creating your future"
http://www.allpointsluxuryhomes.com/
0 votes Thank Flag Link Tue Apr 10, 2012
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