TIPS ON BUYING A NYC APARTMENT

We want to buy an HDC apartment, but the building's considering leaving the program. How will that affect us?

If a building decides to leave a Housing Development Corporation (HDC) program, there are a number of issues to consider. If income restrictions are lifted, owners can tap additional equity in an apartment. Also, once the property is no longer income-restricted, its fair market value will increase. This unlocked equity will allow owners to refinance and take equity out of the property or sell the unit and cash in on the increased value.

On the negative side, the new free market status may also change the building's makeup, attracting more investors and renters. Leaving the HDC program may result in those who have more limited incomes and who have potentially worked to improve a neighborhood, no longer being able to afford to purchase in that building.

HDC subsidies make sense because they allow middle-income individuals and families to stay in the city. HDC is a city agency that offers subsidized building loans that make apartments affordable and require escrowing of monthly reserve replacement, which keeps buildings financially sound.

It also helps that HDC has an engineering and financial staff to make sure proposed capital projects make sense and that the building has the available funds to complete a project. In addition, before HDC releases any funds to the contractors, it checks to see that every "I" is dotted and "T" is crossed in the contracts. With HDC, you have a partner who shares the desire for your property to be successful that extends beyond paying back the loan or inter-building politics.

Peter von Simson is CEO of New Bedford Management.

What does it say about a co-op if it doesn't have any on-site staff?

Not having a staff at a building is not a reflection of an inferior property, and in some ways can be a bonus because of the great savings in operating expenses on a daily basis. Having an on-site staff does not indicate anything more than greater expenses.

Your management company will have someone address everyday basics and be able to offer services similar to a full-service building. Many of the properties we manage in Soho, Tribeca, and throughout the city have no issue not having a staff on-site and are achieving comparable sales prices to buildings with full on-site staff.

Paul T. Brensilber is president of Jordan Cooper.

We're looking at the building's financial statement from last year. What is the most important number to look at?

This is an easy question: the maintenance or common charges. It is imperative for a managing agent and board to make sure maintenance or common charges are sufficient for the building to operate at break-even or small surplus levels.

Boards that keep their heads in the sand and refuse to raise maintenance or common charges to the correct levels so that they do not operate at a deficit are not fulfilling their fiduciary obligations to shareholders or unit-owners.

If you don't get your income number at the right level you are always going to be behind the eight ball: not able to pay bills or make sure routine repairs or small improvements are addressed in a timely manner. In the end, that makes it impossible for you to plan for the future of your property.

Mark Hoffman is principal at Hoffman Management.

Our broker said we have to submit an alteration agreement to renovate the apartment we want to buy. Why the paperwork? It's obviously a wreck.

Buyers of new, newly renovated, or original apartments have all been bitten by the renovation bug. Renovations are at an all-time high throughout our nearly 25,000-unit portfolio. At Metro Management, we confront this almost daily. The broker was correct to inform the buyers that they will probably have to fill out an alteration agreement and gain board approval. Most co-op leases and many condo governing documents require board approval for renovations. Many owners feel that since they bought their apartments they should be able to renovate at will and often don't understand why they can't just call in a contractor. Although many renovations improve the overall value of the property, when done incorrectly these can have a negative impact on unit-owners and the building.

The alteration agreement sets forth the policy and procedure under which renovations are permitted from the smallest to largest detail. This protects the apartment owner and the building against pitfalls that can accompany renovations. For instance, is the contractor adequately insured? How long will the renovation take? When will the noise stop?

The alteration agreement also stipulates the hours and days work is permitted, and also the penalties for noncompliance with stipulated rules.

One main component of the alteration agreement is a written scope of work. When all information is available, we can present the renovation package to the board, which can then make an informed decision in the best interests of all owners. This results in a faster, more efficient renovation with the least amount of disruption.

David Baron is president of Metro Management Development.

Why would a building have a financial statement that is not audited? Should we be concerned?

An annual financial statement reports on your building's financial condition and cash flow. This report is relied on by shareholders or unit-owners, by prospective purchasers, and by lending institutions. Almost all co-op and condo bylaws require an inspection of books of accounts in the form of an annual report. Most require that the annual report be audited and issued by an independent certified public accountant. When the bylaws do not call for the auditor to "certify," the co-op or condo board has the option to have its accountant issue a report that simply compiles or reviews the property's books and records.

It is in the building's best interests to have an independent accounting firm prepare an audited financial statement so that the independent CPA can report that, in his or her opinion, there are no misstatements in the audited report, and that the information is presented fairly and accurately. The CPA cannot make that representation if the report is merely a compilation or review. A certified audit gives the building the greatest level of credibility for both new buyers and lenders, and qualifies the building to receive the most favorable financing options from banks and creditors.

Gary Ziprin is CFO of Midboro Management.

My broker told me that there hasn't been a board election in several years. Is something amiss?

Discovering that a co-op has not held board elections in several years is certainly something that warrants investigation. As elections take place at annual meetings, the more significant "red flag" issue would be the absence of such meetings, which generally require a quorum.

Ideally, because a co-op apartment is a significant investment, shareholders would be interested in ensuring a quorum and serving on the board. In many cases, however, if the building is functioning well, and shareholders are pleased with the board in place or with the candidates presented, a board can be voted in by acclamation. That is still considered an election. If the annual meeting lacks a quorum, no election can take place and the sitting board remains. This in and of itself does not necessarily indicate any problems.

However, if there has been no election because of the absence of an annual meeting, there is cause for concern. It is more than likely a violation of the building's bylaws and New York Business Corporation Law and should be remedied.

Michael Mintz is CEO of MD2 Property Group.

The lack of detail or sparseness of minutes could be a sign of either deficient governance, poor secretarial skills, and/or an intentional attempt to obscure or not disclose something.

Notwithstanding the foregoing, the sparseness of minutes may simply be based on the recommendation of the board’s managing agent or legal advice of its corporate counsel following the axiom that “less is more,” since the critical issue is the quality not the quantity of content. Accordingly, minutes containing the date of meeting, attendees, issues, or discussion topics, approved or tabled, are sufficient regardless of detail.

Bram G. Fierstein is president of Gramatan Management.

Annual maintenance increases are an extremely important strategy to keep up with cost-of-living increases, which we face every year. Since overall operating expenses never seem to decrease, annual maintenance increases allow us to be proactive in planning to cover these expenses.

One of the co-ops we manage, 21 Fort Washington Avenue, a Housing & Development Finance Corporation building, implements a minimum 2 percent increase every year to maintain financial stability. Thus, even if our projected budget does not call for an increase, it is important to stay consistent and maintain the increase.

Also, it is much easier to communicate a 2-percent increase per year than a 15 to 20 percent increase every 10 years or when the co-op is in financial distress. Shareholders understand the need for these increases and it allows the building's accounts to maintain a positive cash flow throughout the year.

Joseph L. Bavaro is senior vice president and director of property management at Finger Management.

We plan to travel overseas and will need to sublet our apartment. Should we look at co-ops or condos with this in mind?

Generally, condo rules concerning subletting are less restrictive than those of co-ops. The similarities are that both co-ops and condos usually limit the maximum term of a lease to one or two years and the minimum term must be a year. Many co-ops will not review a sublet package unless the shareholder has owned the apartment for a minimum amount of time (usually a year or two) and often have a limit on the number of years an apartment may be sublet.

Additionally, both co-ops and condos require that an application that includes financial information must be submitted to the board, similar to a sales package, and co-ops sometimes require an interview with the prospective subtenant.

However, one important difference is that co-ops can deny a sublet without giving a reason. Condos have a right of first refusal, which means that if a condo votes to deny a sublet application, then it must market and rent the apartment at the stipulated rent. This is the reason that almost all condo sublet applications are approved.

Arline Kob is principal at Key Real Estate Associates.

The co-op we are interested in doesn't allow pets. My dog is a "comfort dog," so how do I handle this?

My advice is to be straight with the board. When you submit your purchase application, be sure and tell them about the dog. In your board submission, include proper documentation for the dog confirming that he is a true comfort animal (in some cases we have seen such certification). Additionally, you should submit proper documentation for yourself, or whoever is residing with you, asserting that the dog is needed. The board cannot discriminate against an applicant who legitimately needs a comfort animal and has proper documentation. Not being upfront can lead to an unnecessary legal challenge, which can be very expensive for all parties.

Ira Meister is president of Matthew Adam Properties.