Co-op board wants to ban incompetent broker. Can it?

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Co-op boards have been known to go to great lengths to protect resale values, including turning down a sale if they believe the price is too low or encouraging buyers and sellers to strike backroom deals that produce artificially inflated closing prices.

Now, stung by a lowball sale of an apartment that lingered for a year on the market in the hands of an allegedly inattentive agent, a board member on Habitat’s BoardTalk forum wants to know if it’s okay to bar the agent from handling any future sales in the building.

BrickUnderground checked in with a few of our legal experts and found opinions strongly divided.

Co-op boards have “exclusive control over the operation of the building subject to the shareholder’s rights contained in the proprietary lease and bylaws,” says real estate lawyer Stuart Saft.  “Since I have never seen either document contain a right for a shareholder to use a particular broker, the board could certainly ban an incompetent broker or one who is dishonest from handling sales in the building…unless there is a showing of self-dealing, discrimination or bad faith and unless a broker-board member is attempting to control a building’s sales.”

While agreeing a board has a right to ban brokers, attorney Dean M. Roberts questions whether incompetence is a strong enough reason to interfere with a shareholder’s freedom to hire.

Real estate attorney Robert Braverman, meanwhile, says the board has no power to blackball a seller's agent.

“That is a private business arrangement between the shareholder and the broker,” he explains. “What does an individual’s decision to retain a particular broker have to do with operation of the building? A proprietary lease does not give a shareholder the right to eat Kashi Wheat Flakes for breakfast. Does that mean a board can ban the cereal from the building because it is partially sweetened and not the healthiest choice for your morning meal?”

As a practical matter, he notes, a ban might not even be necessary:  “Why would another shareholder retain an incompetent broker who failed to get a good price on the sale of a neighbor’s unit?”

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