Q: I was considering buying a co-op with a private backyard on the Upper East Side. The backyard was included in the offering plan. The seller and I agreed on the price, but then the board introduced a licensing agreement that imposed a monthly charge to use the yard. This fee was equal to 18 shares, though the buyer would not get those shares. The board also imposed rules regarding how and when the backyard could be used. Potential buyers had to sign the agreement to be considered. Is it legal for a board to impose a separate fee for a backyard that belongs to the unit?
A: If the backyard is part of the unit, the board cannot require you to pay a license fee to use it.
“In fact, if it is part of the unit, the monthly maintenance assessed to the unit would technically cover the cost of the backyard, and any additional amount the board would attempt to collect from you would be tantamount to double-dipping,” said Leni Morrison Cummins, chair of the condominiums and cooperatives practice at Cozen O’Connor, a Manhattan law firm.
It’s possible the board is trying to correct a mistake from the past, that predated the seller’s occupancy. If the backyard is not part of the unit, the co-op may have the right to license its use.
But you have to ask why the board is introducing the licensing agreement now.
“It sounds like there’s something very fishy about the board now requiring a license agreement and payment for the equivalent of 18 shares worth of maintenance,” said Steven D. Sladkus, a partner at Schwartz Sladkus Reich Greenberg Atlas LLP, a Manhattan law firm.
You mention that the backyard is included with the apartment in the offering plan, so the more likely scenario is that the board may be trying to generate income for the cooperative.
The other thing to keep in mind is that a license, by its nature, can be revoked (though there are irrevocable licenses). If you were to sign this license, would the board, later on, say that actually, you can’t use the yard?
“The buyer is going to say that’s crazy, that’s a deal breaker,” Mr. Sladkus said.
If potential buyers walk away, the board may be failing in its fiduciary responsibility to the seller as a shareholder.
Your broker can ask the seller’s broker to seek more information from the board about its basis for imposing the license fee and why it wasn’t charged before.
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