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Can I get out of a co-op contract without losing my deposit if an assessment is bigger than expected?

  • In most cases it's up to the buyer's attorney to verify assessments before contract signing
  • If the assessment amount changes your debt-to-income ratio you may be rejected by the board
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By Emily Myers  |
May 22, 2023 - 9:45AM
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Your ability to get out of the deal and get your deposit back depends largely on the the terms of your contract. 


Two weeks after I signed a contract for a co-op in an Upper West Side building, shareholders there were informed about a $900,000 assessment. This is nearly twice the amount my attorney was told. Can I back out of the deal without losing my deposit?

If you are made aware of a larger-than-expected assessment for a co-op between contract signing and closing, your ability to get out of the deal and get your deposit back depends largely on the the terms of the contract, our experts say.

A co-op seller is expected to disclose to potential buyers what they know about any maintenance increases or assessments adopted by the board. The standard contract for a co-op purchase will state how the seller has not received further notice of additional assessments or maintenance increases as of the date of contract signing.

"If this language is not modified in the seller’s rider, then the question becomes whether the seller had 'actual knowledge' of the assessment prior to entering in to contract," says attorney Steven J. Szczesny, senior associate at the law firm Romer Debbas.  

Look closely at the terms of the contract

Proving a seller knew the true size of the assessment and did not disclose it could be established if the topic was discussed at a board meeting and the seller was present during the meeting. 

Szczesny says if it can be proved the seller had actual knowledge prior to entering into contract, the buyer may have an argument that the seller made "a material misrepresentation in the contract that amounts to a breach entitling the purchaser to cancel the contract and receive their deposit back." Keep in mind issues like this generally lead to litigation, because neither party wants to forfeit the deposit without a fight, he says.

Most attorneys, however, make sure there are provisions in the contract that put the duty to verify the maintenance and upcoming assessments on the buyer's attorney. 

"The seller is not generally responsible for acts or omissions of the corporation or its managing agent, and it is incumbent on the purchaser to do their due diligence before signing," says attorney Hal Coopersmith, a partner at Coopersmith & Coopersmith. 

In most cases, the buyer accepts the risk that costs may change over time, he says.

If the language in the contract makes it clear it is the buyer's responsibility to independently verify assessments and maintenance increases, you will not be able to get out of the contract.

Debt-to-income and board approval

Even though you may not be able to back out of the transaction, a solution may be presented to you if you are rejected by the co-op board. If the cost of ownership is substantially increased by a large assessment, Coopersmith says you may become "a less than ideal candidate for the corporation." Co-op contracts are contingent on board approval. 

If your revised debt-to-income ratio is affected this too might be relevant in the rare circumstance you have a funding contingency from a lender. A funding contingency frees you from the contract with your deposit if the bank fails to fund the loan for any reason except one that is your fault.

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Emily Myers

Senior Writer/Podcast Producer

Emily Myers is a senior writer, podcast host, and producer at Brick Underground. She writes about issues ranging from market analysis and tenants' rights to the intricacies of buying and selling condos and co-ops. As host of the Brick Underground podcast, she has earned four silver awards from the National Association of Real Estate Editors.

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