A real estate purchase in New York City is a complex transaction, and even more so when you’re buying a co-op. For a buyer, working with an experienced NYC broker that is dedicated solely to their interests can make all the difference. They can help you navigate the often lengthy and in-depth process of preparing for and submitting a board application and then negotiating with the seller on your behalf from offer through closing. If you're buying a co-op, it's essential to have a knowledgeable coop attorney by your side to guide you through the intricacies of the process and ensure a successful purchase.
Unlike condos, where buyers typically have their own mortgage, a co-op has a shared ownership structure with other tenants (shareholders) who are collectively responsible for the entire building. Co-ops also have different purchasing requirements, such as board interviews and a specific approval process. Your coop attorney will assist you in preparing for the board interview and ensure that you meet all the necessary criteria for approval.
To become a resident of a co-op, buyers must be approved by the board of directors, which reviews their financial history, credit report, debt-to-income ratio, and other criteria to ensure that they will be good tenants and can afford to pay the monthly maintenance charges. Co-ops also have strict rules about subletting, and most require that buyers have enough post-closing liquidity to cover one to two years of maintenance. Your coop attorney will review your financial documents and help you understand the co-op board's requirements and expectations.
For many would-be buyers, these stringent requirements can be daunting. A skilled and experienced real estate attorney can help you to understand the co-op board’s reasoning behind their decisions, as well as help you prepare for and submit a strong board application that maximizes your chances of being approved by the co-op. Your coop attorney will guide you through the application process and ensure that all the necessary documents and information are provided to the co-op board.
Once a contract is negotiated with the seller, the next step in a coop purchase is to get a loan commitment from a lender. This is typically a prerequisite to finalizing the purchase and is based on the terms of the seller’s existing loan with the co-op, if there is one. In addition to the purchase price, you will be expected to pay a share of the co-op’s operating expenses, which typically includes maintenance and property taxes. Your coop attorney will work with the lender to ensure that all loan requirements are met and that the closing process proceeds smoothly.
The purchase and sale of co-ops in Manhattan are unique in that the purchaser essentially buys shares, or equity, in the corporation that owns the co-op building in which they wish to live. These shares represent ownership of a proprietary lease for a specific portion of the building, much like buying stock in a company. The benefits of living in a co-op include a sense of community, where all owners know and care about each other and the overall condition of the building. Your coop attorney will ensure that you understand the legal implications of buying shares in a co-op and the responsibilities that come with co-op ownership.
However, a co-op’s ability to maintain their property and keep their share prices stable can be compromised by factors such as the current low unemployment rate, rising interest rates, and inflation. These conditions have led to a cooling of the Manhattan market and a slower sales pace than usual, especially for traditional condominiums. However, for those who are willing to buck the trend and take advantage of this more favorable environment, there is still room to negotiate with sellers and find an apartment that fits your needs. To learn more about navigating the unique and complex processes of buying a co-op in Manhattan, contact Avenue Law Firm today, and schedule a consultation with a coop attorney to get the professional guidance you need for a successful co-op purchase.
When you buy a co-op apartment in New York City, you are essentially buying shares in a corporation that owns the building. As a result, you do not receive a deed like with a condo. Instead, you have a proprietary lease that sets out the rules and rights of occupancy. This lease is also what ties you to the monthly maintenance fees, which are used to pay for operating costs, any underlying mortgage, and property taxes. In addition, you may have to meet the board’s requirements in terms of income and credit before being approved to buy a unit. It's crucial to have the guidance of a knowledgeable coop attorney during the application process to ensure that you meet the board's criteria and increase your chances of being approved.
If you do not meet the criteria set forth by the board, you will have a slim chance of being accepted into your desired building, and the process will take longer than if you were to buy a condo. This is especially true if the building is in Manhattan, where the requirements are often stricter. Your coop attorney will help you navigate the application process and provide you with valuable insights on how to meet the board's requirements.
The Prevailing Wage legislation signed into law on Labor Day requires that all NYC cooperatives and condominiums wishing to continue to receive the Coop/Condo Abatement for Fiscal 2023 (which begins July of 2022) attest that all building service employees are paid prevailing wages. This affects buildings with 30 or more units whose assessed value averages $60,000 or more per unit, and smaller cooperatives and condos of fewer than 30 units whose assessment averages $100,000 or more per unit. The Department of Finance has created an attestation portal for all affected buildings to complete. Your coop attorney can assist your co-op board with the necessary attestation process to ensure compliance with the legislation.
In order to comply with LL97, all buildings larger than 25,000 square feet are required to annually input their energy and water use in the Portfolio Manager portal to ultimately receive an energy grade. This grade must be posted prominently at the entrance to the building and will be used in part to determine penalties under LL97. Your coop attorney can advise your co-op board on the energy reporting requirements and help ensure that your building meets the compliance standards.
Unfortunately, the process is very complicated and time-consuming. A recent study for the Real Estate Board found that 20% or more of buildings of 25,000 square feet will not be in compliance with the mandate next year, including many small and mid-sized co-ops and condos that house teachers, nurses, civil servants, and senior citizens who cannot afford to meet the mandate’s steep financial penalties. In such cases, your coop attorney can represent your co-op board and work towards seeking exemptions or modifications to the legislation that could be beneficial for your building.
CNYC and other advocates for cooperatives have been working to clarify the law to exempt housing cooperatives from LL97 Part M. Last June, Queens representatives John Liu and Edward Braunstein introduced the needed legislation, which was passed this year, allowing housing cooperatives to make exemptions from the law. Unfortunately, Council member Levin has now introduced a bill that would eliminate this ability and completely tie the hands of cooperatives and condos with their commercial tenants. We urge you to contact your Council representatives and ask them to pull support for or seek major modifications to this dangerous legislation. Your coop attorney can help your co-op board navigate the legislative landscape and advocate for the best interests of your building.
Unlike a house sale where the seller and buyer sign a contract and close on the property, co-op and condo purchases require a different layer of approval. This process can cause delays in the closing and if not taken seriously, can derail the sale altogether. It's essential to work with a coop attorney who can guide you through the approval process and ensure a smooth closing.
The purchase application must be submitted to the board before the contract is signed; this can also be a source of frustration for a buyer who may feel they are qualified but the board rejects them without any explanation. The board’s decision is not binding on the buyer, and the board has a lot of discretion in their decisions. Your coop attorney can help you understand the board's requirements and prepare a strong application to maximize your chances of approval.
It is important to speak with a lender early in the sale process so that the purchaser can be pre-approved and start the board application process as soon as possible. Some boards have a policy where they will not review the application until the buyer has a loan commitment in hand, which can be problematic for buyers who are trying to move quickly. Your coop attorney can work with the mortgage company to ensure that all necessary documents are provided on time.
The attorney representing the purchaser will prepare and review the purchase contract, which outlines the terms of the sale. He/she will negotiate any provisions that are unfavorable to the purchaser and ensure that any negotiated terms are reflected in the final contract. If the purchaser is obtaining financing, the attorney will work closely with the mortgage company to ensure all documents are in order. He/she will also conduct due diligence on the building and cooperative to ensure that there are no issues that could impact the sale. This includes reviewing financial statements, bylaws, and board minutes. Your coop attorney will handle all the legal aspects of the purchase, ensuring that your interests are protected.
If the co-op is a stock corporation, the shareholders must purchase “stock transfer tax stamps” from the NYC Department of Finance in order to complete the transfer of ownership. This fee is $0.05 per share and is one of the smallest closing costs. Your coop attorney will ensure that all necessary taxes and fees are paid, and the transfer of ownership is completed smoothly.
The seller must also pay a brokerage commission to any real estate agents involved in the sale, a New York City and State transfer tax, and in some cases, a “flip tax” or other fee charged by the specific co-op. Your coop attorney will review the closing statement to ensure that all the seller's financial obligations are accurate.
At the closing, the purchaser will give the seller their funds in exchange for the conveyance of the property. The purchaser will do a walk through with the seller typically on the day of or day before closing in order to make sure that nothing has changed since they signed the contract. Your coop attorney will be present at the closing to ensure that all necessary documents are executed correctly and that the transfer of ownership is completed smoothly.
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