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COOPERATIVE & CONDOMINIUM APARTMENTS IN MANHATTAN
* OWNERSHIP
* BUILDING
TERMINOLOGY
* APARTMENT TERMINOLOGY
* HOW TO PURCHASE A COOP OR CONDO IN MANHATTAN
* BOARD PACKAGES /INTERVIEW
* CLOSING COSTS FOR SELLER & PURCHASER
CO-OPS Manhattan's Primary Housing Style
Co-ops, (short for cooperatives), are apartments owned by a corporation. Individual tenants do not own their apartments
in exactly the same way that they would a condominium or a house. They actually own shares of stock in the corporation. These
shares are apportioned based on the size and floor level of their apartment, and ownership is established by a stock certificate
and occupancy is governed by a proprietary lease.The corporation pays all real estate taxes, maintenance expenses, and the
underlying mortgage on the building. The coop owner's portion of the payment depends on the number of shares owned in the
corporation.
Cooperative ownership is the most common form of apartment ownership in New York City. There are three
times as many co-ops as there are condominiums in Manhattan, which means that there are more co-operative apartments on the
market and they are likely to be more affordable than similarly sized condominiums.
Basically, cooperative ownership
offers the same advantages with a few extras:
1. The tenant-owners elect a Board of Directors, whose responsibility
is to meet, interview and approve or disapprove a prospective owner, thereby protecting the present tenants interests
by approving only qualified candidates.
2. Cooperative ownership offers a more stable community environment. Residents
tend to stay for longer periods of time, and few co-ops allow extensive subletting, preferring a high owner-occupancy.
3. A large portion of the monthly maintenance fee paid by each shareholder is tax deductible, i.e. the pro-rata share of
the cooperation's real estate taxes, as well as the building's underlying mortgage payment.
There are some disadvantages,
however, in purchasing and owning a coop:
1. The board often requires a larger cash down payment. Usually prospective
purchasers are required to put 25% down. Some co-ops may require more. Many of the most exclusive buildings permit no financing
at all.
2. Most co-ops prefer owners to be occupants; therefore subleasing an apartment may be difficult. Each coop board
has its own set of rules, but generally speaking, subletting will have to be approved by the board, and permission is usually
granted for no more than 2 years. Some co-ops, however, are more flexible and are known as easy boards.
3. Owners are
normally not allowed to use their apartments for professional or business purposes.
4. Almost all renovations to individual
apartments will have to be approved by the board.
5. Owners who wish to sell their apartments will have to have the new
buyer approved by the board through the application process.
Despite the disadvantages, cooperative ownership remains
a very popular option for residential ownership in Manhattan. Mitchell Hall, REALTOR can be relied upon to guide you through
the purchasing process.
CONDOS - CONDOMINIUMS
Owning a condominium in Manhattan is the same as owning one
anywhere else. It is a fee simple ownership, and the buyer receives a deed in a formal title transfer. Monthly payments to
the condominium are called common charges, and they are used strictly for maintenance and upkeep of the jointly owned areas.
Of course, the amount of interest on the owner's personal mortgage is fully tax-deductible.
Fee simple ownership
gives owners the right to rent their apartment, making it a better investment opportunity. Mortgage amounts can be as high
as 90% of the sales price if the buyer qualifies. Often there is not a formal application process, so the time from contract
signing to closing is usually shorter.
CONDOPS
Condops are Co-ops with Condo Rules. The building is usually
a condominium with both commercial and residential units. The Commercial and Residential units together make up the condominium.
The Residential Portion of the Building is a cooperative with shareholders and proprietary leases. The proprietary lease
in a condop usually gives the board first right of refusal to purchase an apartment and no Board approval. The board issues
a waiver of first right of refusal the same way as in a condo. Usually they have 30 days to exercise their right of first
refusal or issue a waiver. Condops usually can be sublet and are investor friendly. There is an underlying mortgage on the
Residential Units. Condops usually require a 20% downpayment. Condops offer the tax advantages of a Coop and the flexibility
of a condo.
BUILDING TERMINOLOGY
BROWNSTONE
One to six floors. No doorman. Built in the late
1800s and early 1900s as single family homes. Many were converted during World War II to create multiple apartments (3-10
units per building.) Brownstones have charm, high ceilings, architectural detail, and usually wood burning fireplaces. Square
footage is generally less than a similar room count would provide in a doorman building.
ELEVATOR BUILDING
Located
mostly in the mid blocks. Usually six to nine stories; and many are found on side streets. Non-doorman building. Some pre-wars
have an elevator attendant, and many have intercom security and live-in supers.
LOFT APARTMENT
Four to eleven
or twelve story buildings. Former commercial buildings converted to apartments. Large open space. Usually an elevator (sometimes
a freight elevator) but no doorman service. Most are found in lower Manhattan in SoHo, Tribeca, or Chelsea. Some have restrictions
regarding tenancy such as status as a certified artist.
LUXURY DOORMAN
Twenty to forty or more floors, and
a twenty-four hour doorman. These are also postwar buildings. The more luxurious buildings also have a concierge who provides
services such as receiving laundry and packages. Some of these buildings have a health club and/or swimming pool and a parking
garage.
PREWAR BUILDING
Ten to 16 floors. Doorman or non-doorman. Built 1900's to 1940s. Exterior and interior
architectural detailing. Common features include high ceilings, hardwood floors, arched doorways, or fireplaces. Most are
co-ops.
POSTWAR BUILDING
Built from 1946 through today. Exteriors are usually white, red, or brown brick.
Usually less expensive than pre-wars. Long corridors with many apartments per landing. Eight foot ceilings, big closets, and
small kitchens. Laundry facilities are usually in the basement.
WALK-UP BUILDING
Up to five floors. No elevator
or doorman. Originally built as multi-family housing, this is one of the cheapest apartment options. Sometimes called railroad
flats, these apartments can also be very charming compared to newer buildings.
APARTMENT TERMINOLOGY
ALCOVE
An area adjoining the living room space which can be used for a dining area or be separated or closed off to make a bedroom,
den, or office.
CONVERTIBLE, FLEX, OR JUNIOR
An apartment with a larger alcove off the living room which
can be converted to another bedroom, or which can be used as a dining area. A convertible two-bedroom flex two is a one-bedroom
apartment with a large alcove and 1 or 2 bathrooms.
FURNISHED UNITS
Units which are fully equipped with furniture
and amenities. Apartments are available for long and short-term use.
JUNIOR
An apartment with a small alcove
off the living room which can be converted to a small bedroom or used as a dining area. A junior 4 would be a potential 4-room
apartment: living room, bedroom, kitchen, and alcove area (bathroom is not counted as a room.)
LOFT AREA
Sometimes
found in apartments with high ceilings. An upper area which has been built for storage or as an extra sleeping area or living
area.
STUDIO
A studio is a two-room apartment (the kitchen is considered one room). An alcove studio is a
studio with an alcove for dining or sleeping. A studio with a windowed alcove large enough to be a bedroom can be referred
to as a junior one-bedroom or junior 4 (3.5 rooms).
ONE-BEDROOM
A one-bedroom is a three-room apartment (kitchen,
living room, and bedroom). A one-bedroom with a windowed alcove large enough to be a bedroom is called a junior 4 (4 rooms),
flex, convertible 2 (convertible to two bedrooms).
TWO-BEDROOM
A two-bedroom can be a four, five or six-room
apartment. A flex or convertible is a two-bedroom apartment with space for an additional room (third bedroom, dining
room, den, maid's room, etc.).
CLASSIC
A classic is an apartment in a pre-war building, which has a formal
dining room, 1 or 2 baths, and, in a larger apartment, 1 or 2 maids rooms. A classic 6, for example, is a 6-room apartment
in a pre-war building that has a living room, formal dining room, two bedrooms, kitchen, maid's room, and 1 or 2 bathrooms.
In the larger classics, it is common to find the smaller maids rooms combined into one larger room. Frequently, pre-war buildings
have been gutted and rehabbed, but room counts and layouts will usually be listed according to their original configuration.
HOW TO PURCHASE A COOP OR CONDO IN MANHATTAN
1. Start out with a neighborhood choice and a
budget in mind.
2. Consult your Realtor, mortgage broker and/or banker regarding a mortgage. (If you need to know
how much you can afford, find out BEFORE looking.)
3. Select a real estate attorney, someone who specializes in
Manhattan co-ops and condos. Suburban lawyers or lawyers who specialize in other fields can spell trouble or delay.
4. Discuss with your broker a negotiating strategy and make an offer. In New York City, offers are submitted verbally,
and negotiations proceed back and forth over the telephone and may be confirmed in writing until all aspects of the sale have
been agreed to price, amount to be financed, occupancy date, closing date, disposition of lighting fixtures, etc.
5. Accepting the offer: There is no legal obligation between buyer and seller until a contract is signed. In a hot market,
this process should move quickly.
6. Gain information about the building you've chosen its financial and physical
condition, its history as a coop, etc. Your agent and your lawyer will guide you in this process and your attorney will go
through the due diligence process.
7. Going to contract: The seller's attorney prepares the contract and forwards
it by messenger to your attorney. Both attorneys consult and agree on all points.
8. Signing the contract: You
sign it first, then it's sent back to the seller's attorney to obtain the seller's signature. A down payment is expected at
this point usually 10% of the contract price, which is held in the selles attorney's escrow account.
9. Complete
the mortgage application, if any.
10. The bank that is providing the mortgage will arrange to have the apartment
appraised.
11. Prepare the board (or condo) application.
FOR A COOP:
12. Consult with your
Realtor first, and then begin preparing the board application package. (See How to Prepare a Board Package.)
13.
Submit completed board papers, along with mortgage commitment letter to your REALTOR..
14. Coldwell Banker Hunt
Kennedy managers thoroughly review the package.
15. Board package is submitted to the managing agent who then
orders the credit
check, and forwards the application to the board members.
16. Some or all of the board
members interviews purchasers. Your salesperson
will be your guide.
16. Board approval is obtained.
FOR BOTH CONDOMINIUMS AND CO-OPS:
17. Closing is arranged by the seller's and buyer's attorneys, in conjunction
with the
lender.
18. Move-in time is coordinated with the building's superintendent.
19. The entire
process can take between 2 to 5 months.
HOW TO PREPARE A BOARD PACKAGE
A major aspect of purchasing
a co-op apartment is completing a purchase application and assembling financial documents and references, which together are
commonly referred to as The Board Package. First time co-op buyers are often shocked by the amount of confidential material
required by boards. Just be assured that the information is kept confidential.
The primary purpose of the Board
Package is to assure the corporation of your financial ability to carry the apartment (boards are tougher than banks) and
to give them confidence that you will be a cooperative shareholder and a welcomed member of their community.
Each
co-op has its own set of requirements and application form which your Realtor will obtain for you from the building's managing
agent.
OUR TWO MAIN RECOMMENDATIONS ARE THESE:
Read the instructions on the cover page carefully and
plan to provide ALL the information requested. Your agent will translate some of the items for you.
Be sure your application,
references, and supporting documents are neat and clear.
THE MOST COMMON ELEMENTS OF A BOARD PACKAGE ARE:
1. Purchase Application Should be typed. Fill in all the blanks and answer all questions: name, address, social security
number, name of attorney, schools attended, etc.
2. Credit Release Form. Your permission for the managing agent to obtain
a credit check on each applicant. Just sign it.
3. Contract of Sale. A copy will be acceptable.
4. Financial Statement.
A blank form is usually provided in the package. Basically a statement of all assets and liabilities AND supporting documents,
it is VERY important that all sums on the statement reconcile with the attached supporting documents. For instance, don�t
list a checking account balance as of January 1, and then include the February statement as backup. Every item on the statement
(except for personal property) needs documentation.
5. Reference Letters. A combination of personal and business references..
Please ask your friends and associates to be specific and glowing in their comments. These letters are an opportunity for
a Board to get to know you.They also provide subjects for the interview discussion.
6. Tax Returns. Many co-ops require
the last one or two most recent Federal tax returns.
7. Landlord Reference. Verifying your past prompt payment
of rent or maintenance charges.
BOARD INTERVIEW
Approximately two weeks after the completed Board Package
has been submitted to the managing agent, you will be called for an interview. If your schedule has unusual constraints that
would limit your availability for meeting with the board, your broker will indicate this the cover letter for the board
package.
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