Guide to Resale Policies


Your co-ops’ governing documents (Bylaws, Proprietary Lease, Certificate of Incorporation and HPD’s Regulatory Agreement, if applicable) may contain regulations that will govern certain aspects of the resale process.

For example, your income guidelines and profit split are outlined in your governing documents. Additionally, some HPD Regulatory Agreements contain resale price charts. However, if you desire a stand-alone comprehensive policy/guide, your HDFC will need to create it.

Your governing documents do not contain information about required notice requirements, rights of first refusal, intent to sell, the approval process, the vetting process, the interview process, etc. For this reason, it is recommended that your cooperative create an all-encompassing guide in order to educate your shareholders about, the often complicated, sales process.

UHAB is available to assist boards of directors with the development of resale policies. Once drafted, the policy should always be reviewed by your attorney. Additionally, resale policies should be voted on by your shareholder body (a 66%, 2/3rd affirmative vote is required). This guide is intended for use by both UHAB coordinators, and cooperative boards of directors.

Purpose of a resale policy:

  1. To clarify the sale process to the shareholders. It is very important that all the Shareholders know what their rights and obligations are regarding resale. Some of this information is contained in the existing corporate documents, but not in an easy to read format, many issues are left vague, or not addressed at all. Creating a clear, concise policy which the shareholders will vote on, and receive copies of, will help to clarify the process.
  2. To ensure affordability for individuals and families who meet the outlined income guidelines. Your income guidelines depend on when your cooperative converted. Some documents require adherence to Section 576 of the Private Housing Finance Law, some require adherence to Article XI, Section 402 of the Private Housing Finance Law. For a small subset of HDFCs, HPD set the maximum income at 165% of AMI. More recent (HPD) conversions with Regulatory Agreements simply state that prospective shareholders income cannot exceed 120% of AMI. If your cooperative was converted via a non-profit developer or the Inclusionary Zoning program, your maximum income may be set at 80% of AMI.
  3. To ensure that the HDFC corporation has input and control over the sales process. The Corporation has final approval/denial power with respect to any prospective shareholders.

What do your corporate documents say about resale?

Before starting work on a resale policy, you should become familiar with what your corporate documents and regulatory agreements already say about the subject. This will be different depending on the type of documents the building has.
Below is a brief summary of the restrictions that may be outlined in your documents. As individual buildings’ Offering Plans may vary based on the conversion date, you must always it is refer to the relevant sections of your building’s original corporate documents.

The Certificate of Incorporation

The COI outlines your corporate purpose. Your COI might state that your corporation was organized exclusively for the purpose of providing housing for persons of low income. As you know, the definition of “low-income” has changed drastically over the years. Many COIs contain your income guidelines or a formula you are obligated to use to calculate the maximum income. It is imperative to review the COI before embarking on creating a resale policy.

The Proprietary Lease

Some Proprietary Leases address notice requirements and require the outgoing shareholder to turn in the original Proprietary Lease and Share Certificate upon notice of intent to sell. Your Proprietary Lease may also specifically state that the board MUST approve ALL sales and transfers, but that approval CANNOT be unreasonably withheld. It is imperative to figure out what aspects of resale the PL already addresses so that you do not create a policy that is contradictory or in opposition to your governing documents.

The Bylaws

Your bylaws often obligate you (the board) to oversee sales and transfers in accordance to what is outlined in your COI and/or Regulatory Agreement. This means that you have a fiduciary duty to check for income eligibility and ensure that profit split, as outlined in your governing documents, is strictly followed. Your bylaws may also reinforce the corporation’s right to charge a fee to cover legal cost incurred related to sales and transfer. Your bylaws may also reinforce the corporation’s right to charge a “Flip Tax”.

HPD’s Regulatory Agreement

A Regulatory Agreement is a standard tool for preserving affordable housing. The RA outlines a series of expectations between the residents of your HDFC and a governing body or lender.

Your RA may require that you maintain waiting lists for both insiders and outsiders. Your RA mostly likely reiterates and reinforces your required profit split. For more recent conversions, it’s quite possible that your RA will contain resale price charts or a price calculation formula, an obligation to commit part of sales proceeds to pay down loans and/or to deposit in reserves. You may also need to adhere to an HPD proscribed Marketing Plan. Many RAs require you to have you Monitor approve all sales.

Conclusion: You must absolutely review ALL governing documents before writing a resale policy. It is imperative that there is consistency among your documents. Inconsistency causes confusion. Once a resale policy is drafted, you need to be aware that some of your other governing documents may need to be amended to maintain consistency.

Drafting your resale policy: A step-by-step guide

The Introduction/Declaration of Purpose

Every resale policy should begin with a statement of purpose. Remember that the purpose for which the Corporation was established is to provide affordable housing to low-income persons and families. You should include the definition of «Low Income» in accordance with what is outlined in your governing documents.

Who will be Responsible for Finding the Buyer?

While the Board of Directors has the ultimate power to accept or deny any prospective buyers, under many circumstances, the seller can find their own buyer. Please keep in mind that the board is also legally obligated to certify that the prospective buyer meets the income guidelines set for your building.

Many HDFCs have waiting lists and are bound to take candidates from either their insider or outsider waiting lists. A resale policy can obligate a seller to first consider applicants from the building’s waiting list prior to seeking a buyer on their own. Your resale policy can also contain a clause called “the right of first refusal”, meaning that the selling shareholder is obligated to first offer to sell their shares back to the corporation.

Here is a sample “Order of Priority” for the selling of shares owned by the HDFC.

«In re-selling the shares assigned to the Corporation, the Corporation shall adhere to the following order of priority in determining who shall be eligible to purchase:
 Shareholders who are prime residents and in good standing, who need a larger apartment because their family size has grown; or who need an apartment on a lower floor due to age or disability.
 Adult family members of shareholders in good standing, provided that one or more of the family members has resided in the building at least two years/24 Months.
 Applicants from the Corporations Insider/Outsider waiting list.
 Any other purchasers approved by the board of directors. «


It is important that the Board get written advance notice of a shareholder’s intent to sell their shares and move out of the building. Three or four months’ notice is standard and is the amount of time stipulated in many HDFC Proprietary leases.
You might want your policy to read:

«Notice: If a shareholder within our corporation decides to move, she/he/they are required to notify, in writing, the Board of Directors of this decision a minimum of four months in advance. This Notice may be irrevocable.

At the time of serving Notice, the departing shareholder shall:

a. Return to the corporation their Proprietary Lease and signed Stock Certificate.
b. Provide the cooperative with a list of board approved capital improvements to the apartment and their costs.
c. Provide the cooperative with a list of improvements/appliances that the shareholder shall remove from the apartment.

Setting a Resale Price

Shareholder’s Base Equity

It is important to first establish the shareholder’s base equity. «Base equity» is the original purchase price, assessments and capital improvements (if your building considers capital improvements).

There are pros and cons to reimbursing shareholders for the capital improvements.

Reimbursing for board approved capital improvements encourages shareholders to make improvements which can add to the value to the apartment and to the building.

The disadvantage is that it can be difficult to figure out exactly how much “improvements” are worth at the time of sale.

Setting a price can be difficult as most HDFC governing documents do not place a cap on the potential sales prices. However, HDFCs with HPD Regulatory Agreements sometimes have resale price charts that must be strictly followed.

For those HDFCs that do not have any form of price caps or resale charts, the question the board should address is: What is a fair and affordable price?

Below are several examples of formulas you can use to calculate a resale prices.

Formula A: No Profit

«The maximum resale price shall consist of the sum of the following:

 the initial purchase price paid by the shareholder;
 any special assessments charged the shareholder;
 the total cost of Board-approved capital improvements made by the shareholder, up to the limit set by the board as indicated in the resale policy.

This formula is very restrictive. It does not allow the shareholder to get any profit above the amount of his/her base equity. Since no profit is being made here, the Corporation would not get any money out the sale either.

Formula B: Limited Profit

«The maximum resale price shall consist of the sum of the following:

  • the initial purchase price paid by the shareholder
  • any special assessments charged the shareholder
  • the total cost of Board-approved capital improvements made by the shareholder, up to the limit set by the board. In this example we will use $2,000.
  • 3 % interest (simple interest, not compounded) on the amount of the initial purchase price (1) x the number of years the shareholder has owned the apartment.»

Example: Mrs. Smith bought her apartment for $2500 five years ago when the building converted to co-op. Now she wants to sell her shares. Since she bought, she has been charged a $500 special assessment, and she has made $1,000 worth of capital improvements to her apartment.

The sales price would be calculated as follows:

  • $2500 (initial purchase price), plus
  • $500 (special assessment charge to her by the HDFC), plus
  • $1,000 (capital improvements she made to her unit), plus
  • (3% of $2500) = $75 x 5 years (she was living in the unit) = $375
  • So, the total resale price would be $4,375.00.

This formula allows the original price to increase very gradually the longer you own your shares. However, because the amount of the original purchase price was so low, and she decided to sell after only 5 years, the amount of profit is extremely small.

Formula C: «Price per Room»‘

«The maximum resale price shall consist of the sum of the following:

  • The Base Transfer Value. On the first resale of any apartment, the base transfer value is defined as $1,000 x the number of rooms in the apartment, so that the base transfer value of a 5.5 room apartment is $5,500. (3 bedrooms, living room, kitchen, bathroom counted as half room.
  • On all subsequent resales of the same apartment, the «base transfer value» is defined as the previous purchase price paid for that apartment.
  • Any special assessments charged the shareholder by the HDFC.
  • The total cost of any Board-approved capital improvements made by the shareholder, up to a limit set by the board, in this instance $2,000.
  • Interest rate of 3 % interest (simple interest, not compounded) on the amount of the base transfer value, times the number of years the shareholder has owned the apartment.


Mr. Jones bought his 5.5 room apartment five years ago for $5,500. Since then, he has been charged a $500 special assessment, and made improvements worth $1,000, with the approval of the Board.

The resale price will be:

  • $5,500 = Base Transfer Value, PLUS
  • $500 special assessment charge, PLUS
  • $1,000 represents the worth of board approved capital improvements made to the unit, PLUS
  • $165 represents the 3% interest rate on the $5,500 base transfer value
  • $825 represents the earned interest), $165 x 5 years = $825.

TOTAL resale price would be $7,825.

Again, if your HDFC has an HPD Regulatory Agreement and that Regulatory Agreement contains resale price charts, you MUST strictly adhere to that price chart.

Payment for Shares & Transfer Costs

The actual sale and payment for shares will happen at a closing, at which the Corporation receives the resale price from the buyer, and pays the seller his/her share. Any maintenance arrears or other moneys owed by the seller to the Corporation» would be deducted from his/her share. In addition, your resale policy could stipulate that if any damage has been done to the apartment by the seller, then the cost of restoring that damage will be deducted from the seller’s share by the Corporation.

In order to protect the Corporation, and because legal documents must be drawn up in every sale, UHAB strongly recommends that the Corporation have the transfer of shares supervised by its corporate attorney. Most HDFC’s stipulate in their resale policies that the costs associated with closing (including the attorney’s fee) will not be borne by the Corporation, but will instead be paid by the buyer and seller.

In addition, whenever the ownership of stocks is transferred, transfer taxes must be paid, and transfer tax stamps obtained and affixed to the stock certificate. The seller is responsible for paying these transfer taxes.

Amending Your Corporate Documents

Once an HDFC has drafted a proposed resale policy, the draft should be given to their corporate attorney for review (to make sure that the policy complies with the Certificate of Incorporation, The Regulatory Agreement and other applicable laws).

The Board then must present the proposed policy to the shareholders for a vote. 66 and 2/3rd % of shareholders must vote in the affirmative in order for the proposed resale policy to be adopted.

The Board should distribute copies of the proposed policy well in advance of any shareholders meeting to vote on the document. This will give shareholders time to read the policy and formulate questions.

As you have probably figured out by now, resale policies can be complicated and issues around resale can become contentious. Creating a comprehensive guide can help the board and shareholders navigate an often anxiety inducing process.

Related Resources

2021 Area Median Income Guidelines

What do income limits mean, how are they determined, and what are the income guidelines for 2020?

Sample Resale Policy or Amendment to Proprietary Lease

Sample policy on selling units in your HDFC, plus notes on capital improvements.