New York City co-ops are famous – or, to some, notorious – for their abundance of rules. But the coronavirus pandemic – and the stalled sales market that came with it – have led many co-op boards to relax their rules on everything from sublets to pets to the financial profiles of apartment buyers. Brick Underground has come up with a list of some of the more common changes:
Sublets. Co-op proprietary leases have different rules on sublets, but most limit them to one or two years in any five- to seven-year period. The lease might also require that the shareholder must live in the apartment for two years before subletting it. Changing the sublet policies became an urgent priority for some co-ops when shareholders fled the city during the pandemic. Wendy Sarasohn, an agent with Brown Harris Stevens, says the reason for the change is obvious: Boards don't want empty apartments. If shareholders have moved out of town, she says, "It’s very difficult to hold them accountable for their maintenance."
In addition, some co-ops are allowing more flexible sublet terms – in some cases less than the conventional 12 months, according to Philip Horigan, founder of Leasebreak, a short-term rental marketplace.
Financing. During the sluggish sales market prior to the pandemic, there was pressure on co-ops to show more flexibility with their financing arrangements for buyers. Sarasohn says market conditions resulting from the pandemic have intensified that need. She is aware of at least one co-op building in Carnegie Hill that doesn't allow more than 50% in financing, but the board is meeting this month with a view to increasing that to 65%. The higher cap still requires a substantial down payment of 35%, but Sarasohn says it makes the building more competitive with buyers who want to take advantage of low mortgage rates. "Even people who have the wherewithal to pay all cash want to borrow," she says.
Liquidity. Another daunting co-op obstacle is the post-closing liquidity requirement. In Sarasohn's view, the demographic of the Fifth Avenue co-op buyer is shifting away from the older pied-à-terre or second-home buyer to young families who have high incomes but not the liquid assets to get past the board. She knows of one co-op on Fifth Avenue that lowered its post-closing liquidity requirements – three times the value of the property in assets – just as the pandemic hit. The building in Carnegie Hill is considering making similar changes at its upcoming meeting.
Pieds-a-Terre. Since so many New Yorkers are spending time away from the city, says Michael J. Franco, a broker with Compass, some boards have lifted restrictions on pieds-à-terre as a way of increasing the buyer pool.
Outdoor space. Bianca Colasuonno, a broker with Compass, says she has seen co-ops in Queens open up grounds that were previously off-limits. "They have all these beautiful, closed-off grounds that they don't let anyone sit on or even touch the grass,” she says, “but now I see them starting to open those to people to allow them to enjoy the space.”
Pets. Some boards have shown flexibility about pets as cat and dog adoption soared during the pandemic. Sarasohn was working on a deal with a co-op buyer who she was told had a dog. Even after it was revealed that the buyer actually had two dogs, the board allowed the deal to go ahead. That small change, according to Sarasohn, points to a much larger change: "We are moving towards an environment in which co-op rules are going to be more user-friendly.”
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