WEB EXCLUSIVE: ALLOWING TRUSTS AND REVERSE MORTGAGES

 

Let's say your senior neighbor is in reasonable physical and mental health and a regular member of the community. Many seniors have low incomes, and since all hands must pull together to keep a building afloat, a board can help by alerting seniors to a number of state and city programs. (See WEB EXCLUSIVE: Where to Find Help.) “Boards and managing agents rarely check to see what seniors are getting or entitled to," says veteran real-estate attorney James Samson.

The final two big issues involving seniors in a co-op or condo are trusts and reverse mortgages. These are complicated legal and financial instruments, but here are some basics: a trust is an arrangement in which money or property is managed by one person or organization (the trustees) for the benefit of another (the settlor). Seniors often put things in a trust when they begin to feel they may not be able to take care of their money or property well themselves.

Until 1986, however, "the federal government prohibited corporations, partnerships and certain trusts from owning co-ops," says Samson. "Most offering plans were written before them, so you need to amend your corporate documents to allow at least trusts to own co-ops. The second step is for the board to develop criteria. It's not that difficult. You can't become elderly-friendly unless you allow senior to put apartments in trusts and, in certain circumstances, in their kids' names. Sometimes you have to loosen up your policies to allow people to do the logical thing that they have to do, as long as it doesn't hurt the co-op."

Reverse to Go Forward

A Reverse mortgage is a loan available to those 62 and older in which homeowners are paid a lump sum or given a schedule of regular payments based on the equity in their homes. The loan is not repaid until the owner dies, moves out, or sells the home. Some state and local governments offer low-cost, "public sector" reverse mortgages to seniors.

Darryl Hicks, spokesman for the Reverse Mortgage Lenders Association trade group, describes the pros and cons of such loans. "They can help provide a way to supplement your retirement income or pay for services you may need to age in place or continue living independently," he says. "The cons are that if you're looking to leave your home to your family, you may want to consider some other options, since frequently the loan is paid back when you permanently leave or sell your home. Also, if you're looking to leave your home within a year, there may be other options that are less expensive. Like any mortgage product, there are fees associated with it; the longer you stay in your home, the more economical the loan.

“In the event you outlive the life-expectancy table," he adds, "you still get your fixed monthly payments, even if you've used up all the equity. That's why there's insurance on this product; HUD [the U.S. Department of Housing and Urban Development] will make the lender whole" in such cases.

Boards have to approve reverse mortgages, of course, and in general, says says James Goldstick, vice president of Mark Greenberg Real Estate, "The feedback I've gotten from attorneys is there's no reason not to allow them. I ask attorneys if they recommend them, and they say, 'Absolutely.' "

Bylaws should be changed to allow them with responsible restrictions. And aside from everything else, "Make sure," Goldstick says, "that the shareholder applying for it will pay processing fees for the co-ops's attorney to review the [mortgage] document to make sure the co-op is being protected."

— Frank Lovece