© 2013 All rights reserved. Chapter 16 Condos and Coops1 New York Real Estate for Salespersons, 5 th e By Marcia Darvin Spada Cengage Learning.

© 2013 All rights reserved.Chapter 16 Condos and Coops 1

New York Real Estate for Salespersons, 5th e

By Marcia Darvin SpadaCengage Learning


Chapter 16

Condominiums and Cooperatives


Chapter 16 Key Terms

Alteration

agreement

Board package

Bylaws

Common elements

Condominium

Condop

Cooperative

Covenants,

conditions, and

restrictions (CCRs)

© 2013 All rights reserved.

Chapter 16 Key Terms (continued)

Declaration

Flip tax

FlippingHouse rulesLetter of intent

MaintenanceOffering plan or

statementProprietary leaseRecognition

agreementShare loanSponsor

Chapter 16 Condos and Coops 4


Condos and Coops

Condo-title transferred by deed

Coop- title transferred through sharesof stock


Cooperatives

A cooperative corporation usually owns the land, buildings, and property rights and all interests

The title to the property, as shown on the deed, is in the name of the corporation



What are Shares of Stock?

The shareholders do not own real estate, but a proportionate number of shares of stock in a cooperative corporation

As lessees, the shareholders pay a monthly maintenance fee-the rent



Key Issues to Review in a Co-op Board’s Minutes

Maintenance and Assessment History

Underlying Mortgage

Reserve Fund

Many cooperative reserve funds receive income from the flip tax, a charge levied when units change hands



Cooperative Board Application and Interview Preparation

Before SchedulingInterviewConsider

Co-opBoard

Application

Interview Prep

The Role Of Time

FamiliarizePurchaser Package forDiscussion purposes

Need for total disclosure

By purchaserDuring

Interview

Real Estate Example: Why?Dr. Leslie is a single woman who is paying cash for a cooperative. She has sizable and safe investments and no debt. The cooperative board refuses her. No reason is given.



CPS1 Phase: Cooperative Policy Statement

• Sets out New York Attorney General’s rules • how a developer

may test market for a new development before filing the offering plan and before construction is completed

• The CPS1 period • lasts 120 days

from acceptance of the CPS1 statement by the Attorney General

• can be extended by request from the developer for an additional 60 days



Documents Needed for the Sale/Purchase of Cooperatives

AlterationAgreements

House Rules

Offering Plan

Stock Certificate

Proprietary Lease



Primary Residency Versus Subletting Issues In the Cooperative

Primary resident owner of the cooperative unit

Subletting allows tenant shareholders more flexibility in

ownership board may limit the length of time a tenant

shareholder can sublet a unit

If the sponsor owns the shares allocated to the apartment, he may be permitted under bylaws or rules to sublet or rent a unit even though a unit owner cannot



Difference Between a Condop, Condominium, and Cooperative Apartment

A condop isa building that includescondominium and

cooperative ownershipin the same structure

Real Estate Example: Why it is created?

Building owner Sal owns a multi-unit apartment building that includes a store on the street level. Sal records the Declaration of Condominium, dividing the property into two condominium units: Condo A (the commercial unit) and Condo B (the residential unit). Sal continues to own fee title to the commercial condominium unit and collects rent from the store. As fee title owner to Condo B, Sal deeds the residential unit to Big City Co-op Corp. in exchange for the shares of Big City Co-op Corp. Various blocks of shares are allocated to the different apartments. Sal now sells the block of shares allocated to each unit (together with a proprietary lease) to individual purchases.



Condominiums A structure of two or more units Interior space is individually owned Common elements, are owned by owners

of the individual units To create, the owner/developer of the

property signs a condominium declaration

Shareholder’s rights and obligations are in the condominium’s bylaws

The sponsor is the owner or developer.



Offering Plan

Size of unit

Size of unit

The floor plansThe floor plans

The constructionThe construction

The size and materialsThe size and materials

The plans of recreation buildings The plans of recreation buildings

The make and model of appliancesThe make and model of appliances

The scope of the landscaping The scope of the landscaping

The land on which condominium is locatedThe land on which condominium is located



Offering Plan Amendment:Building Conversion

NYS lawWhen a developer files an offering plan

with the Attorney General to convert an existing building to a condo or co-op, the tenants have a 90-day exclusive right to buy their apartment

During this period sponsor cannot negotiate separate prices



Offering Plan Amendment :New Development

o New building and after 90-day tenant’s exclusive period in a converted building

o sponsor can separately negotiate the price of a particular apartment

o The developer can sell one apartment for $200,000 and then sell another identical apartment for $175,000



A Condo and Coop Closing ComparedCondominium

Cooperative

Type oftransaction

Fee simpleownership

Personal property; shares of stock

Transfer documents

Deed Proprietary lease

Taxes at closing

NYS transfer tax

NYS transfer fee; flip tax


Closing CostsReal

EstateTax

TaxDeductions

Common Charges

Mansion Tax

MortgageRecording

Tax

Right of First

Refusal

Chapter 16 Condos and Coops19


Flipping Real estate

investors or speculators believe that they can turn quick profits by buying the property at a certain price and then immediately selling the property at a higher price

Flipping may be a problem because it can drive up prices

The investor attempts to buy low and sell high


© 2013 All rights reserved. Chapter 16 Condos and Coops1 New York Real Estate for Salespersons, 5 th e By Marcia Darvin Spada Cengage Learning.

Documents

corporation chapter

days chapter

rent chapter

coops3 chapter

hands chapter

coops2 chapter

property rights

shares of stock slide