Two residents claim they were “held hostage” by a “price-fixing” scheme at their Lower East Side co-op.
Eleanor Stromberg and Douglas Price, who have lived at 577 Grand Street for 22 years, have seen their apartment sales decline twice. Now they’ve filed a lawsuit against their co-op, the co-op board and board vice president Shuli Wollman, alleging the board demanded an unreasonably high price for the couple.
The elderly couple wanted to move to a location where Price’s health care needs could be more easily met, but the council had “killed” the market for their home, according to their attorney Lee Bergstein.
“What happened in the building was not right,” Bergstein said.
The first buyer offered $520,000 for the Stromberg unit, matching comparable sales of $514,500 to $528,000 and the unit’s $525,000 estimate.
The suit says the board rejected the application without complying with its charter, telling Stromberg’s broker that the deal was rejected because of a “low” purchase price.
The buyer agreed to a second contract for $540,000, but the board allegedly rejected the deal again, at which point the broker was told the board would not accept anything below $600,000 — 15% over 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 after being rejected a second time, the unit sat dormant on the market for a year, leading the owners to think they couldn’t find a buyer for $600,000.
In April, they found a buyer willing to pay $620,000 in exchange for a $100,000 concession from the seller, according to Bergstein.
The board also rejected the deal, which Bergstein said appeared to be retaliation for his client’s lawsuit — and would not approve any deal until the complaint was dropped.
Wollman, who is also an executive at the company that manages the building, did not respond to a request for comment.
The seller’s concession is a tool brokers use to close the deal when the co-op board sets a price above the market floor, a common practice in New York City to support higher prices for future sales of the building. To compensate buyers for paying inflated list prices, sellers offer rebates and credits or shoulder the tax burden they would not otherwise pay.
The price of the bluff was later recorded in city records.
“It’s not a multimillion-dollar lawsuit, but we think it’s an important one.”
Critics say the practice places an undue burden on sellers and forgoes future compensation at a time when interest in co-ops is starting to wane.
Deception is possible because the co-op board can reject a buyer for any reason without explanation. Brokers said that when the board said the rejection was due to price, they were often vague.
“We’ve all been there, but never written it down, never,” Compass agent Vickey Barron previously told real deal.
According to the lawsuit, the board of directors of 577 Grand Street made the mistake.
In addition to telling Stromberg and Price why the board rejected their first two contracts, the board told several other shareholders in the building similar stories of their rejections, including citing “the proposed sales price of the apartment” in the rejection email. , Litigation claims.
“The board rejected seven packages based on numbers. … It was not rejected based on people, it was based on numbers,” Wollman allegedly told another shareholder, according to the complaint.
Elliot Caplan, the management company’s assistant general manager and sales manager, told the same shareholder, “The board decided at their last meeting that they would no longer accept lower apartment prices, no matter what the market said. … They decided they wanted Hold on, and they will … push and insist on higher prices,” according to the lawsuit.
Bergstein said he was optimistic about the possibility of litigation, citing a previous New York case ruling that found setting a minimum price for a unit was an unreasonable restriction on shareholders.
“It’s not a multimillion-dollar lawsuit, but we think it’s an important one,” Bergstein said. “We hope this lawsuit is helpful to other shareholders in the building who are facing similar situations.”
