Co-ops in NYC value job security, so any change to your employment status during the purchase
process is a challenge which must be navigated with care, even if you’re found a higher
paying job.
If you already submitted your board application and received approval prior to accepting a
new job, there’s nothing to worry about. But what happens if you accept a job offer
before the application has been submitted, or after the application is submitted but
before the interview? In either case, you certainly need to disclose your new employment
plans to the board.
We’ll discuss how to handle a job change during the co-op board approval process in
the following video.
I’m Nick at Hauseit, based here in NYC. Check out our website hauseit.com to learn
how to save money if you’re buying or selling real estate here in New York. So let’s get
started!
So first question, what is your duty to disclose?
To be absolutely clear, you have no duty to disclose possible changes in your employment
status. If you’re applying for jobs, at the interview stage or even close to receiving
a job offer, you have no obligation to share this information with a co-op board since
there is no concrete change to your employment status as of yet. You might simply be exploring
your options.
Even if you’re received a job offer (or perhaps multiple), you still have no obligation
to disclose this information to the co-op board since you haven’t committed to anything.
However, the moment you accept a job offer and sign the offer letter, this becomes something
which the co-op board might need to know about.
Let’s say you’ve accepted a new job offer but you’ve already submitted your application,
completed the board interview and received co-op board approval. Must you disclose this
information? Legally speaking, probably not. Assuming there is no material change in your
financial status, you really have no obligation to disclose. That being said, always check
with your real estate attorney for official legal advice.
What do we mean by material change in financial status? Let’s say you’re leaving a $500k
a year job at Goldman Sachs to take a $650k a year job at Deutsche Bank. Since you’re
transitioning within the industry to a similar role with similar pay, is not something the
co-op board needs to know about. If, however, you’re leaving a $500k job at Goldman Sachs
to take a $30k job as an entry level mechanic, that could be considered a material change
in your financial status.
Let’s say you’ve accepted a new job offer but you have not submitted your board application.
Must you disclose this planned change of employment, assuming you’ve signed an offer letter?
The answer is unequivocally yes.
What happens if you get laid off before you submit the application, or even after you’ve
already received board approval? Unfortunately, in either case this is considered a material
change to your financial situation and you likely have a duty to disclose this information.
Being unemployed will practically guarantee a board rejection. On the bright side, you
probably don’t want to move forward with a purchase if you were just fired, and board
rejection will typically allow you to recoup your contract deposit and walk away relatively
unscathed.
How to present a change of employment in the board application
When preparing the board package, you’ll need to include a signed copy of your offer
letter. This typically goes in the ‘Employer Verification Letter’ section of the board
package. The offer letter should clearly outline your base salary, bonus and/overtime compensation
(if applicable) as well as any other compensation i.e. sign-on bonus, equity awards, etc.
Oftentimes, an offer letter can be somewhat confusing to a layperson, particularly if
you’re receiving equity awards which vest over time. Therefore, we recommend drafting
a supplemental letter which explains your new compensation structure in easy to understand
language. Creating a table which breaks down your new compensation structure while also
comparing it to your current compensation structure is particularly helpful in this
endeavour.
Here is an example.
If you’re also receiving a signing bonus or other compensation, be sure to explain
how this further improves your annual income. Here’s an example of additional language
which may be added to your change of employment letter:
In addition to the higher guaranteed base salary & bonus offered by my new employer,
they’ve agreed to pay me a $25,000 sign-on bonus immediately as well as issue $100,000
of guaranteed equity awards which will vest over a 4-year period. This effectively increases
my annual compensation over the next 4 years by $31,250/annually, making my total annual
income: $229,000 + $31,250 = $260,250/year over the next 4 years. Overall, this represents
a 47% increase in annual compensation compared to my current employer.
In addition to your offer letter and additional compensation explanation letter, please be
sure to submit an employer verification letter from your current employer.
Next question: How to handle the co-op board interview
If you’re changing employers, chances are that you will be asked about this during the
board interview. Co-op boards are primarily focused on ensuring that an applicant will
be able to pay the monthly maintenance, so a change in employment will naturally ring
some alarm bells.
That being said, you’re likely changing employers because of a more attractive opportunity.
If asked about the job change during the interview, you’ll want to leverage this opportunity
to emphasize the higher compensation associated with your new gig.
If you already submitted your board application and received approval prior to accepting a
new job, there’s nothing to worry about. But what happens if you accept a job offer
before the application has been submitted, or after the application is submitted but
before the interview? In either case, you certainly need to disclose your new employment
plans to the board.