The double-whammy of the pandemic and a tough sales market has led many co-op boards to soften their rules on everything from purchase requirements to sublets to pets. Will the changes last when the city fully emerges from the pandemic? Brick Underground lists some of the areas where a shift to more user-friendly rules might change the future makeup of the city's co-ops:
Sublets. Changing the sublet policies became an urgent priority for some co-ops when owners left the city during the pandemic. Co-op buildings all have different rules in the proprietary lease, but most limit sublets to one or two years in any five- to seven-year period. Boards might also insist that you, the shareholder, have lived in the apartment two years before you sublet. However, Wendy Sarasohn, an agent with Brown Harris Stevens, says sublet polices are easing up for an obvious reason: Boards don't want empty buildings. 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 lease terms – in some cases less than 12 months, according to Philip Horigan, founder of Leasebreak, a short-term rental marketplace.
Buyer financing and liquidity. Even before the pandemic hit, the soft sales market was putting 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%.
A 65% cap on financing still requires a substantial down payment, but Sarasohn says it makes the building more competitive with buyers who want to take advantage of low mortgage rates. "Even people that have the wherewithal to pay all cash want to borrow," she says.
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 just as the pandemic hit. (It had previously demanded three times the value of the property in assets.) The building in Carnegie Hill is considering making similar changes at its upcoming meeting. Michael J. Franco, a broker with Compass, says some buildings have lifted restrictions on pieds-à-terre in response to this pandemic as a way of increasing the buyer pool because so many New Yorkers are spending time out of the city.
However, don't assume co-op boards are completely ditching their financial requirements and restrictions. New York City co-ops are all unique and Sheila Trichter, a broker with Warburg Realty, says many are now more concerned with strong debt-to-income ratios and high liquidity out of a fear that buyers may lose their jobs.
Outdoor space and other amenities. Bianca Colasuonno, a broker with Compass, says she's 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, but now I see them starting to open those to people to allow them to enjoying the space," she says.
It's a smart move for a co-op to provide these types of amenities. On the Upper East Side, Sarasohn says one co-op board is taking notice of the interest in outdoor space. "The backyard looks like it's abandoned and buyers are turned off. The board is recognizing they need to put plantings and make it visually appealing," she says. "It’s as important as the lobby."
Colasuonno says she's also seen co-op buildings add bike storage to meet the demand from residents. In one Fifth Avenue co-op building, the board has decided to expand the gym to include outdoor space.
Pets. As cat and dog adoptions soared during the pandemic, many co-op boards and rental landlords were willing to bend rules. Sarasohn was working on a deal with a potential co-op buyer who had two dogs. Unlike in years past, the co-op board allowed the deal to go through.
"We are moving towards an environment," Sarasohn predicts, "in which the co-op rules are going to be more user-friendly."
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