New York's Cooperative and Condominium Community

Habitat Magazine Insider Guide

HABITAT

NEW YORK CITY

 

There is a large sponsor presence, but my broker tells me the sponsor doesn’t control things. I’m concerned. Could this situation go bad?

Yes, this could be a problematic situation but let’s explore the points of concern and address them.

What is a “large” sponsor presence? What percentage of shares are owned by the sponsor? The larger the percentage, the greater the concern.

Is there any litigation between the sponsor and the co-op? If so, this may be a reason to reject a purchase.  Is the sponsor current with all obligations to the co-op? If not, that is a red flag. Is the sponsor generally supportive of the co-op’s attempts to improve the building? If not, this could be an issue to regard carefully.

What is the specific number of rent-regulated and deregulated apartments owned by the sponsor? A great number of rent-regulated apartments may spell a weaker cash flow and relate to liquidity problems.

Has the sponsor’s ownership affected the co-op or any individual shareholders in their respective financing efforts? If so, this may be a reason to reject purchasing an apartment.

Has the sponsor encumbered his shares and, if so, to what extent? A positive response might be troubling because the sponsor could have problems meeting debt service payments and/or maintenance payments because of excessive financial burdens.

What is the sponsor’s disposition plan? Has the co-op dealt with the sponsor on this issue? It would be beneficial to see that the sponsor is unwinding but not flooding the market with many apartments at a time prospectively, as this could weaken future sales prices for a period.

Howard Landman is vice president of Siren Management. 

Is a Part-time Super Enough?

Written by Stuart Halper on August 26, 2015

Tips on Buying a NYC Apartment, New York City

Does it matter if a co-op only has a part-time super? Will he be able to take care of the building’s needs?

The size of the cooperative (number of units, floors, and square footage), economics/affordability, and demands of the shareholders are the ingredients that dictate the answer to the above questions.

A threshold question must first be addressed; does the property require a super on premises or within a particular distance to the property at all times based on the number of units and the availability of an individual with a boiler license to satisfy New York City regulations?

The availability of an apartment for a part-time super plays into the equation. Better-qualified supers tend to desire the best available living conditions. To attract a strong super, even on a part-time basis, quality housing is important. Stronger supers gravitate toward higher pay and better living conditions.

If the cooperative also employs a porter, the focus for the part-time super can be targeted toward maintaining and repairing the physicality of the property, versus trash removal and cleaning of hallways.

A quality part-time super may work well in certain size properties. It will not succeed if the cooperative is too large or if the super does not have superior skills to accomplish the necessary tasks required by a particular cooperative.

Stuart Halper is vice president of Impact Real Estate Management.

We just looked at an apartment, and there was a smell of cat litter in the hallway. Do you think I should overlook this?

I do not think you should overlook this. Even though you love the apartment, it is better to be disappointed today than to be sorry later. It can be quite difficult to remove cat smells.

Questions need to be asked and actions followed up. Is the smell from cat litter, cat urine, or the cat? Is the owner of the cat cleaning the litter box on a regular basis? Has cat urine penetrated a wood floor that might require replacement? How long have the smells been there? Has anyone else in the building complained and what actions were taken by either the building staff, the property manager, and/or the board of the building?

Besides the cat smells, answers to these questions and the actions taken will also provide some insight into how the building is operated and how well residents take care of their apartments.

Jeffrey Stillman is vice president of Stillman Management.

 

We want to buy a condo, but our bank says they won’t make a loan for that building. Why?

Banks evaluate loans using guidelines supplied by the Federal National Mortgage Association (better known as Fannie Mae). There are three common reasons a building may not qualify under these guidelines. First is the ratio of investor-owned units to primary residence units. Primary residence units are considered lower-risk, as are apartments owned as second homes. Second homes are often incorrectly lumped into the investor percentage. A building’s property manager can perform an analysis to determine an accurate unit ratio.

Another typical issue is the reserve fund. While Fannie Mae requires a 10 percent reserve fund, many banks are willing to accept a lower percentage. We find a reserve study can help the bank evaluate the reserve based on building age, condition, and so on.

The third common issue is insurance coverage. Within bundled insurance policies, it is difficult to assess the coverage for individual properties. A property manager can often supply additional documentation or clarification to address the lender’s objections.

When a building doesn’t meet these or other Fannie Mae criteria, a waiver from Fannie Mae’s Credit Variance Administration System may be requested. Alternatively, another lender may evaluate the loan differently, so it doesn’t necessarily mean that a loan can’t be obtained from a different bank. You should always shop around, and be sure to talk to the manager and the transfer agent about a bank’s specific concerns. There may be an easy resolution.

Mark Motley is senior managing director, owner occupied cooperatives and condominiums, at Rose Associates.

My lawyer said there have been four different management companies over a five-year period at the building we are looking at. Should we worry?

If there is a constant turnover of management companies, one needs to look at the reasons why the property has changed hands so frequently. If the board is making poor choices regarding the management company it hires, prospective purchasers should probably be concerned about the board. Poor decision-making can have a negative impact in building operations and diminish shareholder values.

You should know that over the past 10 years, there has been a significant amount of consolidation in the management industry and many management companies have disappeared as they have been taken over by larger companies. You may want to find out if this has been the case in the building you are interested in.

Fred Rudd is president of Rudd Realty Management.

 

I want to buy an apartment directly from the sponsor. Is that a problem?

That depends on who you are talking to. If you are a prospective buyer, the answer is that it is not a problem. In fact it is a much easier way to purchase into a co-op. When selling an apartment, the sponsor is exempt from following the board's guidelines and interview process, so purchasers of sponsor units do not have to go through the co-op's lengthy application packages and review process and do not need a board interview to purchase. This can save considerable time and money for the prospective shareholder.

As long as the sponsor performs due diligence in qualifying the applicant there is usually not a problem; however, many boards feel that the sponsor's only interest is in selling the apartment and therefore is not invested in putting applicants through extensive background checks that cost money.

Many times we hear complaints that purchasers of sponsor units do not even get a copy of the house rules. We recommend to boards that they should invite the new shareholders to an informal welcome meeting to say "hello" and inform them of house rules and other issues. That way, the new shareholders can be informed. This usually leads to a "good neighbor" feeling and also accomplishes the board's goal.

David J. Amster is president of PLI Management.

We learned that there have been reports of bedbugs in the building we are interested in. Who's responsible for getting rid of them?

Guidelines pertaining to bedbugs vary depending on property types (condo or co-op) and the respective bylaws in the offering plans or shareholder agreements. According to legal precedent, a co-op board is required to keep a building in "good repair" for the shareholders, and that includes extermination services for pests.

In addition, as units within co-ops are considered to be leased as opposed to being owned outright by the tenant, co-ops are generally covered by a "warranty of habitability," as per New York City's real estate property law. Within the city, landlords are required to maintain buildings that are suitable for tenants to live in without endangering the tenants' life or health. Extermination of bedbugs is governed by this law as bedbugs are pests that can pose a health threat.

The warranty of habitability generally does not apply to units within condos, as those are owned outright by the tenant. If one lives in a co-op, it is important to review the terms of one's proprietary lease as some co-op boards will hold a resident responsible for infestations that are limited to the resident's unit only and are not a building-wide infestation. For the condo resident, the building is legally responsible for infestations in common areas or that have been caused by a building-wide maintenance issue. However, the apartment-dweller will be responsible for treatment if the infestation is limited to his or her own unit.

Alex K. Kuffel is president of Pride Property Management.

 

In every cooperative and condominium, you can expect there to be some tension between shareholders and unit-owners and those who sublet (in cooperatives) or lease (in condominiums). If you think boards or fellow shareholders/unit-owners unfairly frown on subletting, think again. Here are some reasons why they do:

The thing about living in a co-op or condo building is that you are part of a community. And while the word "community" connotes a positive environment, we all know that tensions can arise for any number of reasons. For one condo dweller, it's a new neighbor. "Someone just bought the unit next to us and is starting construction without permits," he writes in this week's Ask an Expert column in Brickunderground. "What's our recourse?" Brickunderground experts agree that tattling is the way to go. After all, illegal construction work is no joke. But experts also urge caution: "Keep in mind that depending on the work, your neighbor's project may actually be above board." Rather than go in guns-a-blazing and hurling accusations, experts encourage informing the board and perhaps even the managing agent — they will be able to confirm whether the proper permits have been filed. 

I'm concerned about vermin. Is there some way I can double-check what this building has done about this issue?

The buyer's best approach is to have his or her attorney, as part of the due diligence process, review the last two years of minutes to see if there were issues and what action was taken. The property manager should also be contacted to see if any problems exist or if there is a history of vermin in the building and what measures were taken to solve or alleviate the issue. The manager can also convey how often and effectively the building is treated.

Marsha Kolker is director of operations at Sandberg Management.

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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