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Selling a Cooperative Building in New York

New York cooperative corporations occasionally decide to sell the entire apartment building—usually when the land has become more valuable than the co‑op structure or when shareholders want to convert to condominium ownership. Whether the sale is amicable or contentious, the governing statute is almost always the New York Business Corporation Law (BCL), because down‑state residential co‑ops are formed as ordinary business corporations.

Key Statutes: BCL § 909 (sale of "all or substantially all" assets); BCL §§ 1104 & 1104‑a (judicial dissolution); NYC Admin Code ch. 11 (transfer‑tax obligations).

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Two Legal Paths to a Building Sale

Voluntary Bulk Sale
BCL 909

The process begins when the cooperative's board of directors passes a formal resolution approving the sale of "all or substantially all" of the corporation's assets. This is the first step in initiating the sale process.

Following the board's approval, a special shareholders' meeting must be called with proper notice provided to all stockholders in the cooperative. This ensures that every shareholder has the opportunity to participate in this significant decision.

For the sale to proceed, it requires approval from at least two-thirds of all shares entitled to vote. It's important to note that while the cooperative's certificate of incorporation or by-laws may require a higher threshold of approval, they cannot legally require less than a majority vote.

Unlike some corporate actions, a voluntary bulk sale doesn't require any filing with New York State. However, the cooperative must ensure that its meeting minutes clearly document compliance with § 909 requirements. Once approved, the deed is recorded and all applicable transfer taxes must be paid to both the city and state.

After the closing is complete, the cooperative corporation has two options: it can either liquidate and distribute proceeds to shareholders, or it can continue operating as a holding company that manages the sale proceeds for the benefit of former apartment owners.

Judicial Dissolution
BCL 1104 and 1104‑a

When a voluntary sale cannot be achieved, shareholders may pursue judicial dissolution. This legal process begins with filing a petition in the New York Supreme Court in the county where the cooperative building is located.

Under § 1104 of the Business Corporation Law, shareholders owning 50% or more of the cooperative's shares can petition for dissolution when the corporation's governance has reached a deadlock that prevents effective operation.

Alternatively, § 1104-a provides a path for minority shareholders who own at least 20% of the shares to petition for dissolution based on claims of oppression by the majority, corporate waste, or misappropriation of assets. In these cases, the majority shareholders may elect to purchase the minority's shares at "fair value" rather than proceed with dissolution.

If the court approves the dissolution, it will appoint a receiver who oversees the sale of the building and manages the distribution of the net proceeds after paying all corporate debts and obligations.

Following the sale, the cooperative corporation is formally wound up and legally dissolved, with all shareholders receiving their proportionate share of the remaining cash proceeds.

Shareholder Voting Requirements and Governing Documents

The sale of an entire cooperative building typically requires a super-majority vote of shareholders. In most cases, between 75% and 90% of shareholders must approve the sale, depending on what's specified in the cooperative's governing documents.

Document Relevance to Sale
Certificate of Incorporation May specify the voting threshold required for a sale of the entire property
Bylaws Outlines procedures for shareholder meetings and voting processes
Proprietary Lease May contain provisions related to termination upon sale of the building
Offering Plan The original offering plan may have specific provisions regarding sale of the building

The voting percentage required is based on the total number of outstanding shares, not just the shares represented at a meeting. This makes achieving the threshold more challenging and ensures that such a significant decision has broad support among the ownership.

Bulk‑Sale Timeline (Typical § 909 Deal)

  1. 1

    Board Resolution

    The sale process begins with the cooperative's board of directors passing a formal resolution to sell the building. This requires a simple majority vote at a properly noticed board meeting where a quorum is present. The resolution typically authorizes the board president or another officer to negotiate with potential buyers and engage professional advisors such as real estate brokers, attorneys, and accountants. This initial stage generally takes 1-2 weeks to complete and serves as the legal foundation for the entire transaction.

  2. 2

    Notice of Shareholders

    Once the board approves the resolution, formal notice must be provided to all shareholders. The Business Corporation Law requires that notice of any meeting where such a sale will be considered must be provided in writing at least 10 days (but not more than 60 days) before the meeting. The notice must clearly state the purpose of the meeting and provide details of the proposed sale, including the buyer, purchase price, and other material terms. This ensures transparency and gives shareholders adequate time to consider the proposal and its implications for their investment.

  3. 3

    Shareholder Meeting

    A formal shareholder meeting must be held to vote on the proposed sale. The meeting must have a quorum present as defined in the bylaws (typically a majority of shares). During this meeting, shareholders must have the opportunity to discuss the proposal, ask questions about the transaction details, and express concerns before voting takes place. The board and its advisors should be prepared to address financial implications, tax consequences, and timeline expectations. For the sale to be approved, at least two-thirds of all shares entitled to vote must support the resolution, though many cooperatives have amended their governing documents to require even higher approval thresholds.

  4. 4

    Contract & Due Diligence

    After obtaining shareholder approval, the cooperative's attorney drafts and negotiates a comprehensive contract of sale with the buyer. This stage includes detailed negotiations on price, timing, contingencies, and representations and warranties. Simultaneously, the buyer conducts thorough due diligence by reviewing the building's financial records, physical condition, certificate of occupancy, outstanding violations, and other legal documentation. This investigation phase generally takes between 60-120 days and may involve building inspections, environmental assessments, and review of tenant files. The contract will typically include provisions regarding the dissolution of the cooperative corporation and distribution of proceeds to shareholders based on their proportional ownership.

  5. 5

    Closing

    At the closing, the cooperative corporation formally transfers ownership of the building to the buyer. This process involves recording the deed with the appropriate county clerk's office and paying all applicable transfer taxes to both New York City and New York State. The cooperative's underlying mortgage, if any, must be satisfied and discharged from the sale proceeds. Additionally, any outstanding liens, judgments, or property tax obligations must be resolved. Upon closing, the cooperative corporation is typically dissolved through filing the appropriate paperwork with the New York Department of State. This formal termination of the corporation's existence is essential for properly concluding the cooperative's affairs and avoiding future liability.

  6. 6

    Distribution

    The final step involves distributing the net proceeds from the sale to all shareholders according to their proportional ownership in the cooperative. Before distribution, the corporation must pay off any outstanding building mortgage, transfer taxes, legal fees, brokerage commissions, and other transaction costs. The board, often working with the corporation's accountant, prepares a detailed accounting statement showing the gross sale price, all deductions, and the net amount to be distributed. Each shareholder receives their proportionate share based on the number of shares they own relative to the total outstanding shares. Shareholders should be prepared for tax consequences, as the distribution may trigger capital gains taxes. The distribution process typically occurs within 30-60 days after closing and formally concludes the cooperative's existence.

A unanimously supported deal can close in as little as six months from start to finish. However, contested dissolutions involving litigation often extend the timeline to 12–24 months or longer, depending on the complexity of the legal issues involved and the court's calendar.

Strategic Considerations for Shareholders

Check Your Certificate & By‑laws

It is essential to carefully review your cooperative's certificate of incorporation and by-laws before pursuing any sale. Many cooperatives have amended their foundational documents to require a supermajority of 75% or even 80% of shares to approve a bulk sale, which is significantly higher than the statutory minimum. Conversely, some cooperatives have reduced the requirement to a simple majority vote. These variations can dramatically affect the feasibility of achieving a successful sale. Always verify these specific requirements before counting votes or developing your strategy.

Regulatory Overlays

Special-purpose cooperatives such as Mitchell-Lama and Housing Development Fund Corporation (HDFC) properties operate under additional regulatory frameworks. These cooperatives must obtain consent from relevant government agencies including the Department of Housing Preservation and Development (HPD), Homes and Community Renewal (HCR), or the Division of Housing and Community Renewal (DHCR), in addition to complying with Business Corporation Law requirements. This additional layer of approval can significantly extend the timeline and complexity of a sale process.

Tax Planning

Shareholders should be aware that the sale of a cooperative building will likely trigger capital gains tax obligations on what the IRS considers a deemed sale of their shares. Importantly, the Section 216 exclusion of the Internal Revenue Code, which normally provides favorable tax treatment for cooperative housing, does not apply in bulk sale situations. Shareholders should explore alternative tax strategies such as 1031-like exchanges for reinvestment or installment distribution arrangements that may help mitigate immediate tax impacts. Consulting with a tax professional experienced in cooperative sales is strongly recommended before proceeding.

Minority‑Oppression Buy‑Out

When minority shareholders petition for dissolution under § 1104-a of the Business Corporation Law, the majority shareholders have the legal option to prevent dissolution by offering to purchase the minority's shares at "fair value." This strategic alternative can avoid the full dissolution process, but often leads to complex valuation disputes that can become more contentious and costly than the original sale proposal. These disputes frequently require specialized appraisals, financial expert testimony, and extended litigation. Professional legal and valuation guidance is absolutely critical in navigating these situations to ensure equitable outcomes for all parties involved.

BCL Requirements for Different Types of Co-ops

Different types of cooperative buildings may have additional legal requirements or considerations when selling the entire building:

Standard Market-Rate Co-ops

These follow the standard BCL requirements with voting thresholds as specified in their governing documents, typically 75-90% approval required.

HDFC Cooperatives

Housing Development Fund Cooperatives (HDFCs) are incorporated under both the BCL and Article XI of the Private Housing Finance Law. HDFCs often have additional restrictions on sale, including oversight from HPD (Housing Preservation and Development) and potential limitations on proceeds to maintain affordability.

Mitchell-Lama Cooperatives

These publicly-assisted cooperatives have significant additional restrictions and may require approval from government agencies for a sale, in addition to shareholder approval under the BCL.

Co-ops with Commercial Components

Mixed-use cooperatives may have complex ownership structures that require additional legal considerations when selling the entire building, particularly regarding commercial leases or ownership interests.

The Role of Legal Counsel

Given the complexity of selling an entire cooperative building, engaging experienced legal counsel is essential. An attorney with expertise in cooperative law can help navigate the specific requirements of the BCL and ensure that all proper procedures are followed. This includes:

  • Reviewing the co-op's governing documents to determine the exact voting threshold required
  • Drafting proper notices and resolutions for the board and shareholders
  • Advising on compliance with fiduciary duties
  • Negotiating the sale contract to protect shareholder interests
  • Handling the dissolution of the cooperative corporation
  • Advising on tax and regulatory implications

Need Advice on a Co‑op Building Sale?

Whether you are a board member steering a bulk sale or a minority shareholder seeking fair value, the Law Offices of Albert Goodwin can help navigate New York's BCL procedures and negotiate the best outcome.

212‑233‑1233

About the Author

Albert Goodwin, NYC Real Estate Attorney

Albert Goodwin, Esq.

Albert Goodwin is a New York cooperative attorney with over 15 years of experience in real estate law. He represents shareholders, boards, and developers in cooperative building transactions, including bulk sales and judicial dissolutions under New York's Business Corporation Law.

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