In New York City and many other areas, co-ops are a unique type of living arrangement. Having a co-op real estate attorney can greatly assist purchasers who are looking to buy shares in a corporation that owns a building and receive in return a proprietary lease of a specific apartment. The co-op corporation is different from a traditional landlord in that it is legally responsible for all maintenance, repairs, insurance, and even management of the property. Cooperatives are also governed by the laws of the State and have a board of directors, similar to a condo board, that manages the corporation.
While most New Yorkers know that a co-op is not the same as a condo, the differences are more significant. At a co-op closing, a buyer does not take possession of the deed to a unit (like in a condominium) but rather ownership of shares of stock in the co-op corporation which, in turn, grants the shareholder the right to occupy a certain portion of the building. It's crucial to have a co-op real estate attorney to guide you through this intricate process.
The difference in ownership creates the potential for many more rules and regulations that govern a resident’s lifestyle, as well as more power by the all-powerful co-op board to deny or approve purchase applications based on their whims. Co-op boards have been sued for allegedly discriminating against minorities, the elderly, single women, and others in their application process. Engaging with a co-op real estate attorney can assist in ensuring these processes are carried out fairly.
Under current law, although a co-op board must comply with federal and State anti-discrimination laws, they are free to develop and apply their own policies for screening prospective buyers. This can lead to a process that is difficult for people of color and those with less income to navigate. A co-op real estate attorney can provide invaluable insights and support in navigating these challenges.
The three bills currently pending before the New York City Council, if passed, would impose substantial requirements on the purchase application process for all cooperatives in the City with 10 or more apartments. Hiring a co-op real estate attorney is recommended, as they can keep you updated on such legislative changes and their implications. These include (i) strict time limits for responding to and approving or denying an application, (ii) formal disclosure of the co-op’s finances, including detailed, sworn statements from officers explaining any financial reasons for rejection, and (iii) a requirement that boards disclose their racial and other bias training.
In addition to reviewing and negotiating the contract of sale, a lawyer for a prospective NYC co-op buyer will also conduct due diligence on the cooperative corporation, including reviewing financial statements, past litigation, and other important documents. The attorney will also coordinate with the prospective purchaser’s lender. For this reason, it is essential to have a qualified co-op real estate attorney on your team.
Unlike purchasing a condo, buying a co-op apartment in NYC involves submitting a detailed “board package” to the governing board of your building. The involvement of a co-op real estate attorney can be crucial during this process. The board interview process typically includes a review of an applicant’s financial statements and documents that prove their ability to afford the purchase. If the board approves an application, the buyer must also complete closing procedures.
There are many reasons why a buyer would choose a co-op apartment over a condominium. First and foremost, the price is generally less than that of a comparable condominium. In addition, many of the city’s co-ops feature grand prewar layouts which can be more spacious than condos. Finally, co-ops tend to have a more community feel than condos. To navigate this complexity, hiring a co-op real estate attorney is a wise decision.
Co-op purchases require a more extensive approval process than condos, which results in a longer time frame to complete the transaction. The average time from submission of the final purchase agreement to closing can take between five and eight weeks. Given the intricacies of this process, guidance from a co-op real estate attorney can be invaluable. The entire process can be longer if the coop’s board is unable to approve an applicant or requires additional information to be submitted.
The most common types of cooperative apartments in New York are market-rate co-ops and limited equity housing corporations (LEHCs). Market-rate co-ops are free to set their own prices for shares, allowing the market to determine how much buyers will pay. LEHCs, on the other hand, have strict regulations on pricing in order to maintain affordable housing for future residents. Expertise from a co-op real estate attorney can help clarify the differences and advantages of each type.
Once an applicant submits a complete purchase application and receives their interview date from the coop’s board, they will be required to pay various fees which vary by coop building. These may include a refundable security deposit, administrative fee, maintenance, and closing fees. Often, applicants will be asked to provide copies of their Federal (1099 & W2) and City income tax returns. If the applicant is a foreign national, they will also be required to provide their most recent foreign income tax return. A co-op real estate attorney can help ensure that all necessary documentation is provided.
The purchase agreement will then be reviewed and negotiated by the purchaser’s attorney. The attorney will also conduct due diligence on the coop corporation, which includes reviewing past financial statements and board meetings, as well as any potential legal actions. Additionally, if the purchaser is obtaining a mortgage to finance the purchase, the attorney will work closely with the lender to ensure that the financing is properly documented and ready for closing.
Purchasing any property in NYC is complicated, but buying a co-op is especially difficult due to the lengthy approval process and stringent requirements of the governing board. As such, it is recommended that all prospective buyers seek the guidance of a licensed real estate broker and an experienced attorney. The team is experienced in handling both co-op and condo transactions and can assist clients throughout the process from finding an ideal property to submitting a successful application and completing the closing process. Contact us today to schedule a consultation.
Cooperative housing is unique from condos and single-family homes in that residents own shares in a corporation that owns the building. Utilizing a co-op real estate attorney can be essential to navigate this landscape. As a result, when you buy an apartment in a co-op you also get a proprietary lease that governs your rights and obligations as a tenant. These rules can be quite restrictive, especially when it comes to subletting.
Many times, in addition to having certain financial requirements such as a minimum debt-to-income ratio and stable income, a co-op may also require that you seek board approval to rent your apartment to someone else. A co-op real estate attorney can help you understand these approval requirements. This slows down how quickly you can start renting and if the board rejects your application, it could be awhile before they approve another applicant.
This is one of the main reasons why it's so important for potential renters of a co-op to thoroughly review their sublet policies before they make any final decisions. It’s often recommended to consult a co-op real estate attorney to help navigate these complex sublet policies. Many co-ops are currently struggling financially due to a combination of things including evictions, foreclosures, and low occupancy rates. Many of these buildings don’t have enough money to cover the monthly maintenance fees and escrows that are required for new tenants.
The reason that most co-ops have strict subletting rules is to promote strong owner occupancy in the building and keep vacancies low. Unlike condos, most co-ops have to pay their mortgages from the sale of units and lenders like to see a high percentage of owners occupying their apartments. For those unfamiliar with these rules, a co-op real estate attorney can provide clarity.
While these restrictions may seem unfair, it's essential for potential renters to be aware of their co-op's rules before moving in. A co-op real estate attorney can provide invaluable insight and guidance on these matters, ensuring potential renters are well-informed. As a tenant, you also have certain rights under both New York State and city laws that protect you against discrimination and provide for a habitable living environment.
Despite the fact that the co-op housing crisis has been going on for several months, New York's Department of Housing and Community Development (DHCD) seems to still be treating co-ops as single-family home rentals when it comes to distributing emergency rent relief funds. As a result, there's still an enormous backlog of arrears being owed by renters in co-ops and a lot of uncertainty around what to do next. Hopefully this will change once DHCD starts to distribute new funding. Until then, it's best for renters to take care of their finances and prepare to be a good neighbor.
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