Laura Endres, Partner, Taylor, Eldridge & Endres in Legal/Financial
Cooperative apartment ownership in New York is a unique arrangement: Rather than owning a piece of real estate, purchasers acquire shares in a corporation and take on the responsibility for the underlying real estate. Ensuring the financial qualification of co-op buyers is crucial, and having consistent rules are an important part of the admission process. Standardization, transparency and periodic reviews of procedures are needed in order for boards to fulfill their responsibilities effectively. These practices all contribute to a fair, consistent and legally sound admission process.
Determining financial qualification. Several factors come into play when assessing a prospective purchaser's eligibility. The debt-to-income ratio, credit score and references all contribute to the board's decision-making process. Notably, references provide insights beyond just the financial metrics, offering a glimpse into a potential buyer's suitability as a neighbor. Even so, to maintain transparency and uniformity, co-op boards should adopt standard application procedures. In Suffolk County, a standardized form application is mandatory, outlining purchase requirements and providing information on fair housing and anti-discrimination laws. This standardization ensures boards don't improvise the admission criteria for each purchase.
Time limits and notification deadlines. In both Suffolk and Nassau Counties, specific rules govern the application review process. Boards must acknowledge receipt of an application in writing within 10 days in Suffolk County and 15 days in Nassau County. Furthermore, defects in the application must be communicated within these time frames. The final decision to approve or reject an application must occur within 45 days, with Suffolk County requiring a reason for denial. in Nassau County, you do not have to give a reason for that rejection.
Boards face a dilemma regarding whether to meet prospective purchasers face to face. One of the benefits of meeting in person is to confirm that applications are truthful. Boards can ask purchasers the same questions that are on the application and see if they have the same answers. While meeting allows for a more personal assessment of the applicant's credibility, some boards fear potential discrimination accusations and opt for a paper-based approval process. Balancing these concerns is crucial for boards seeking both thorough assessments and legal prudence.
The transfer process. Once approved, the transfer process involves coordination between attorneys, managing agents and the board. Standardized transfer procedures are recommended to streamline the process. The board should also have set fees for the process. Non-standard transfers, such as those involving trusts, require additional considerations, with some co-ops opting to disallow trusts altogether due to potential complications. Boards can evaluate and refine these procedures regularly, ensuring consistency and efficiency. Procedure sheets serve as invaluable tools for boards. These are documents that outline the procedures adopted by the co-op in given situations. They establish a clear and predictable framework for the transfer process.
Engage, enrage, ask questions and give answers with your community of board members. Submit your questions and comments here!
Co-op and condo board business broken down into bite-sized bits - 2 stories each week. Read now on all digital devices.