Condo boards in city reported to have begun requiring extensive application packages

An increasing number of condominium boards in the city are requiring extensive application packages to weed out financially questionable buyers, according to an article in yesterday's edition of The New York Times by Julie Satow.

"Demands can include years' worth of federal tax returns, detailed lists of all assets and liabilities, several letters of references, and even board interviews. These buildings are waging a war of attrition, forcing potential residents to supply extensive documentation in the hopes that those who appear to be a financial risk will walk away of their own volition," the article said.

"Existing condominiums - buying in a new building is still a relatively simple process - are turning to this strategy," the article continued, "because they have no real power to reject an applicant. The only tool at their disposal is the right of first refusal, which allows condominium boards that are unhappy with a buyer to purchase the unit themselves or designate a buyer for the same price. But few buildings can afford to do so."

Adam Leitman Bailey, a real estate lawyer, told the Times that "it is a bullying strategy," adding "if a condominium has a questionable buyer, they'll just keep asking for more and more information, dragging things out, until the buyer walks away."

"At the Time Warner Center, where many buyers are foreign, it is not necessary to submit federal tax returns. The building does require that in addition to general liability insurance of $1 million, owners have a $5 million umbrella policy to cover any unforeseen costs, like an accidental fire or damage incurred during a renovation. On the Upper East Side, 215 East 80th Street has a 67-page application that requires three business reference letters and three personal reference letters for each applicant. And at Towers on the Park, a condominium at 110th Street and Central Park West, the application packet requires potential owners to list all assets and two years' worth of tax returns, to be certified by an accountant," the article said.

"Some condo owners purchase through a limited liability company or other business entity," the article continued, "and in those cases a number of buildings require that the principal personally guarantee some expenses, such as monthly common charges and assessments. In other cases a condo may require a security deposit, said Ronald H. Gitter, a real estate lawyer."

"'In the past, condominiums would just ask for a simple financial statement,' said Tamir Shemesh, a senior vice president at Corcoran, "but now, due to the financial crisis, even the most exclusive luxury buildings are asking for supporting documents," the article said.

"While it is still the exception, some condominiums are executing the right of first refusal more readily, said Stuart M. Saft, the chairman of the Council of New York Cooperatives and Condominiums, a trade organization. 'In the last 12 to 18 months, I've seen at least 10 situations where the board bought the apartment or designated another buyer to buy it,' said Mr. Saft, who is also the chairman of the law firm Dewey & LeBoeuf's global real estate department," the article said.

Jacky Teplitzky, a managing director at Prudential Douglas Elliman, told The Times that "The brokerage community is in la-la land if they think that just because it's a condo, that every deal will go through," adding that "right now in New York City, the only place that you are not being asked questions is when you buy in new construction."