In 35 years, I’ve had my share of challenging transactions, but this one takes the most recent proverbial cake. I closed on the terraced penthouse in Carnegie Hill this summer, nearly two years after my first meeting with the estate’s executor. For the deal to happen, I needed to overcome at least three significant obstacles. First, the property’s interior had been reconfigured 35 years earlier by an abstract architect with distracting curved walls and pivoting room dividers and needed a total redo. Second the co-op board put up a series of roadblocks by questioning the legality of an upper level that had been annexed to the apartment by a former owner. The 17’x11’ addition with wet bar and bathroom sat directly beneath the building’s water tank and was accessed by a narrow spiral staircase in a corner of the Living Room. A 1992 House & Garden feature highlighted this “Tower Room,” a term I adopted in my marketing. Responsibility for the Penthouse’s wrap terraces was the third serious bane of a sale.
The co-op claimed the upper level had been duplexed without approvals from either the board or the DOB. They said the structure had to be either legalized or removed. Before I was invited in, the estate had already spent thousands of dollars trying to prove that the addition was legit to no avail. As a consequence, the co-op board stipulated that the next purchaser and all subsequent purchasers in perpetuity sign a letter to acknowledge that the board questioned the upper annex and required indemnification. This was an obvious impediment to a sale.
Once I was retained, my first order of business was to identify the right professional who could overturn the board’s onerous requirement. I surveyed my network of smart attorneys who each referred me to specialists who in turn each confirmed that the situation was hairy, there were no practical answers and big dollars would be spent to secure a winning path. I chose to work with a filing specialist whose no-nonsense approach and experience were impressive. Within a month, he uncovered DOB evidence that alterations consisting of a spiral stairway to an upper level including bathroom had been filed in late 1936, approved three months later, and completed on October 2, 1937—seven years after the building was constructed and 20 years before its conversion to co-op ownership.
Reluctantly the board conceded that the upper level preceded the existence of a Board of Directors. But no sooner had they accepted the structure’s legality, than they came back to challenge the 1980 and 1987 renovations undertaken by the then owner now the estate’s deceased. This time the board specified that the next buyer and all those following indemnify the co-op against unspecified “certain issues” raised by previous alterations. It would take another six months for the co-op to accept proof that showed DOB approvals as well as board president signatures for these alterations.
Meanwhile we marketed aggressively holding countless open houses, reducing the price twice, and finally succeeding in getting permission to remove the distracting pivoting walls. More than 80 prospective purchasers visited, with 25% returning a 2nd and 3rd time. Most were intrigued by the unique space, few wanted to undertake a gut renovation, but 3 bona fide buyers bid. An excellent cash offer early on evaporated because of the ambiguity of the Tower Room’s legality; a second bid from a broker buying for herself sat on the table; the accepted offer was from another real estate professional who understood the value of what could be achieved.
As soon as the contract was signed, we started work on the board package. At the same time, the buyer began planning a major renovation, and hours of appointments followed with designers, architects, contractors and subcontractors. Six weeks later, I delivered a package to the board weighing 70 pounds and filling ten thick 5-inch binders each with 24 tabs. Less than a month later, at a scheduled interview, the third major obstacle to a successful closing surfaced in the form of a vaguely worded “Terrace Repair Responsibility Agreement.” The buyers had been approved on the condition that they execute a document about who was responsible for what on the terrace.
The roof under the terraces was old, and the board was interested in replacing it before a new owner made improvements atop an aging surface—and they wanted the new shareholder to pay for half. During showings, I had advised interested parties that the Proprietary Lease held the shareholder responsible for terrace maintenance and repairs. But clearly replacing the entire roof and wanting the new owner to split costs was an unexpected wrinkle. We needed to keep this buyer in the deal however, and we negotiated a $50,000 price accommodation. By this time, the board and its attorney were communicating directly with the purchaser, but when talks stalled, and I saw the buyer lose patience, I took unorthodox action. Leaning on an old passing acquaintanceship with the co-op’s Board President through a mutual friend, I took the liberty of writing him a personal appeal to finalize the Terrace Agreement and clarify open ended terms. The agreement held the shareholder responsible for all terrace horizontals and the co-op responsible for terrace verticals, but clarity was lacking. In addition the document gave the co-op unilateral rights to initiate vertical work anytime which could trigger horizontal work. I emphasized that this particular prospective buyer was in the business and had more knowledge than most about interior and exterior renovations, and that it would not only be a distinct hardship to the estate, but a major loss to the building if these buyers were to pull out. At the closing table last June, a successful dream team congratulated one another.