New York's Cooperative and Condominium Community

Habitat Magazine Insider Guide



It is rare for a co-op to ever go without a mortgage. Most move from one loan to another at the end of each borrowing cycle since, for many buildings, the mortgage supplies a pool of capital ready and waiting for ongoing needs. "Most co-ops use refinancing to pay for capital improvements," Tudor Realty Director David Goodman explains.

The whole process of refinancing a co-op's underlying mortgage – fully investigating the issues, getting the best possible terms, and then completing the deal and the associated paperwork — can take almost a year. The worst part? That's under the absolute best circumstances. And it doesn't take into account how much the co-op may have to pay anyway. And the problems start with that matter of prepayment penalties.

A number of co-op and condo board members have reported that their neighbors are suddenly turning into watchdogs. Some of them hope to create a shadow board to monitor the elected board's every move. Others want their boards to put major expenditures to a vote of all residents. They often believe co-ops and condos be a participatory democracy rather than a representative democracy.

Illegal hoteling is one of the many banes of co-op and condo boards, and one that stings particularly hard because of the the security issue off non-background-checked strangers roaming your building's halls and stairwells. There's also the loss of sublet fees paid by approved residents who play by the rules, and the fact banks won't offer mortgages to people buying an apartment in heavily rented-out cooperatives and condominiums. Plus, New York law forbids apartment rentals for less than 30 days, in buildings with three or more units.

Airbnb and similar short-term rental sites don't much care about any of that. In fact, Airbnb and the organization Peers began a PR and lobbying campaign this spring to try to overturn our laws governing short-term rentals. But now to combat that deep-pocket carpetbagging comes a coalition of more than 100 affordable-housing advocates, community groups, elected officials and others attempting to highlight the impact of illegal hoteling.

A READER ASKS: I've noticed lately that many of my fellow shareholders throw out their plastic laundry-detergent containers instead of recycling them. There aren't any obvious signs that we have a recycling area, but it is there! How can I help increase awareness and help other residents understand how important recycling is?

HABITAT ANSWERS: Your first stop should be the Apartment Building Recycling Initiative, a two-hour program offered monthly by the city's Department of Sanitation (DSNY). There you can learn about all the quick and often free fixes that can be made to increase the amount of recycling in your building and ensure the proper things are going into recycling bins.

First, don't call them "grab bars" — call them "balance bars" and stress how helpful they'd be after a skiing accident or a kid's bad fall skateboarding. You'll find these and other co-op / condo sales tips from a broker and an interior designer in this "Home & Garden" column in The New York Times. Since removing such fixtures leaves holes in the walls, the main advice is to upgrade them and turn liabilities into assets. Sure, a curbless shower is good for wheelchairs — but just check out at how cool and streamlined they look!

Kim Velsey in The New York Observer writes, quite entertainingly, of the travails facing diplomats seeking co-op or condo housing in New York. At many places it's "Diplomats Need Not Apply," as boards worry about diplomatic immunity, security details, endless sign-offs from the State Department and others, and, of course, the dreaded scourge of cocktail parties. Not to mention: You approve one diplomat, there's a coup, now you've got a whole new neighbor to contend with. We learn that while the UK and New Zealand have been given the red carpet, poor France got turned down at River House and Qatar had to buy a townhouse. (We know ... big hardship.) Attorney Steven Wagner offers an amusing anecdote about a bad diplomat in Astoria, Queens. And you don't even want to know what diplomats from poor countries have to contend with. Two words: studio apartment.

ILSA, the federal Interstate Land Sales Full Disclosure Act, was designed to prevent deceptive real estate practices by requiring developers to disclose information needed by potential buyers. But now a bill passed by both houses of Congress and awaiting the president's signature takes that protection away from condominium purchasers. Introduced by Sen. Charles Schumer (D-NY), Sen. Kirsten Gillibrand (D-NY) and Sen. Dean Heller (R-NV), the bill, S. 2101, came after much lobbying by the Real Estate Board of New York, reports Developers had complained buyers were rescinding deals and demanding money back over minor paperwork errors. Buyers have long complained that developers would sell apartments in under-construction buildings and then not deliver the goods — stringing them along for month after month. Supporters of the bill say having ILSA apply to condominiums created uncertainty for developers and that New York State has other anti-fraud protections.

Some condo and co-op boards consult their attorneys as a matter of last resort, and sometimes not even then. Whether relying on hubris, bad advice or a cost-controlling mentality, these boards may end up making decisions without considering all the legal ramifications and potential downsides. The end result could be drastically spending money on legal fees to sort out a mess that could have been avoided.

For self-managed buildings, attorneys take on an even more important role. Not only do they handle all the traditional legal responsibilities, but they can also serve as a financial advisor, consultant and makeshift managing agent.

Single-family houses can get reverse mortgages. Two- to four-family houses can get reverse mortgages. Even condominium apartments can get reverse mortgages — but not co-op apartments. Why? According to a report by The New York Times, it's because most reverse mortgages are insured by the Federal Housing Administration (FHA), part of the Department of Housing and Urban Development (HUD) — and HUD has chosen not to let co-op owners tap into their home equity. As a spokesperson told the Times, “FHA’s single-family programs are based on loans being secured by real property and the co-op structure does not meet this basic requirement.” That's true: In co-ops, owners own shares in the building corporation, which obviously means the apartment can just get up and walk away! Why, co-ops are so undependable and dangerous, banks won't even lend you money to buy them, except that they do. After all, you know those undependable prewar / midcentury buildings in New York City — why you just can't count on their market value ... to do anything except go up. HUD? More like DUD.

Ask the Experts

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Learn all the basics of NYC co-op and condo management, with straight talk from heavy hitters in the field of co-op or condo apartments

Professionals in some of the key fields of co-op and condo board governance and building management answer common questions in their areas of expertise

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