Citi Relocation New York City - Co-operatives and Condominiums in Manhattan, New York




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CONDOS / CO-OPS

Co-operatives (Co-op)
A Co-operative is a form of ownership in which individual owners do not own their actual apartments, but rather they own shares in a corporation that owns the building. The resident/shareholder then has a proprietary lease for the apartment. It is important to note that co-ops often have an underlying mortgage on the entire building, meaning the tenant will have to pay a monthly share of the mortgage. This payment, along with the other costs associated with running the building (real estate taxes, employee salaries, fuel oil, etc) are passed along to the resident/shareholder in the form of a monthly 'maintenance' fee. The amount of shares the resident owns determines their proportion of fees. The amount of shares a resident owns is determined by their apartment's size, floor, light and views. A Board of Directors, (known as the 'co-op board' and comprised of tenants of the building), determine the rules of the co-op and the requirements for applicants looking to either buy or rent in the building. There are both modern and older co-op buildings. Most prewar buildings will fall into the co-op category. About 85% of apartment units for sale and purchase in New York City are in co-ops.

Buying in a co-op

In all co-ops there is a minimum down payment set by the board of directors. It is usually 20-25%, but can be any amount of the board's choosing.
A prospective buyer must go through a formal approval process set forth by the Board of Directors. This usually involves divulging all of your financial information, gathering a set number of reference letters from friends and business associates, and sitting for an interview with the board.
The co-op board has the final say on all applications, and does not have to give a reason if they deny an application.
Most co-ops want the applicant to have a set number of month's or year's worth of maintenance fees in liquid assets after they make the down payment. For example, if the board's rule is that the applicant must have one year of maintenance fees in liquid assets, and the monthly maintenance is $1,000, you must have at least $12,000 in cash equivalents after you make the down payment.
A portion of the maintenance charge will be tax deductible- this is the interest on the underlying mortgage. The deductible portion is usually expressed in an apartment listing as "Maint. $750/mo, 35% TD", meaning that $262.5 of the $750 is tax deductible.
Real estate taxes are included in the monthly maintenance fee

Renting in a co-op

Renting an apartment in a co-op is very difficult as many co-ops have very strict rules in regard to shareholders 'sub-leasing' their apartments.
Many co-ops have rules that stipulate that the apartments may only be sub-leased three out of five years, only year at a time with no renewal, or not at all.
Most co-ops will subject prospective sub-tenants to the same application process as a buyer.
Co-op boards usually meet only once a month at a set time, making the timing of an application very important. If an applicant misses the co-op board meeting one month, they will have to wait until the following month for the board to review their application.

Condominium (Condo)
A condominium apartment is real property. A buyer receives a deed to the property, and owns the apartment outright. By law, there cannot be an underlying mortgage on the property. A unit owner must pay a monthly common charge to cover the costs of maintaining and running the building. Since a condo is real property, the owner would be responsible for paying their own real estate taxes. If the unit owner has a mortgage, the bank collects 1/12 of the yearly real estate taxes every month and pays the city directly out of an escrow account. If the owner pays all cash and has no mortgage, the city will bill them twice a year.

Buying a Condo

You can finance up to 90% of the purchase price, provided you have good credit and sufficient income.
There is an application process when buying a condo, but it is not nearly as rigorous as that of a co-op. You will still need to provide some financial information about yourself, but you do not have to interview. The managing agent of the building sets the rules for buying and renting in the building.
Condos are generally more expensive than a comparable co-op. This price difference is due to the fact that there are less condominium buildings in New York; they are less expensive to carry; easier to rent out; and easier to purchase and sell.

Renting a Condo

Though much less complicated than a co-op application, there is a formal application procedure that must be followed when renting a condo.
The documents and requirements asked of the prospective tenant are similar to those in a rental building, but the process takes one to three weeks.
The condo board has the 'right of first refusal', meaning they can turn you down if they have an applicant of their own, but this is rarely exercised.