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I went to my co-op board interview and was really turned off by the board. I no longer want to live in the building and am hoping they don't approve me. But if they do, how can I get out of the deal and get my deposit back?
Unfortunately, if the board does approve you, it will be very difficult to back out of this deal unscathed, our experts say.
Getting to the co-op board interview typically means you've reached the last stage of the application process, and the meeting itself is just a formality. At this point, you've already submitted an application package that details your finances, undergone a background check, and have been approved for a mortgage. And all the work you've done to reach this point indicates to the board that you intend to become a shareholder, if approved.
"There is an implied covenant of good faith and fair dealing required of contracting parties, and the standard form of cooperative contract of sale requires a purchaser to submit a completed application and to participate in the interview process in good faith," says Jeffrey Reich, a partner at Schwartz Sladkus Reich Greenberg Atlas.
You can't simply tell the board—or your lender—that you've changed your mind. Theoretically, if a financial issue suddenly arose that prevented you from getting a mortgage, you could get your money back, but you can't falsely manufacture such a situation.
"It’s rare that this happens, so if it were to happen in a deal like this, there would be a suspicion of the buyer trying to get out of the deal and get their down payment back, and that would be acting in bad faith," says Deanna Kory, a broker with Corcoran. "The seller would have a right to sue you for acting in bad faith in that case. Legally and ethically, there is no way I can see you backing out and getting your down payment back if you’re approved by the board."
In fact, the seller would have the right to hold onto your deposit, if they suspect you are deliberately trying to sabotage the board approval process.
"A seller who believes that a purchaser has 'tanked' the board approval process can hold on to a purchasers deposit and seek to obtain possession of the deposit, on a theory that the seller has breached his or her contractual obligation to pursue the board’s approval in good faith," Reich says.
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