1. © 2013 All rights reserved. Chapter 16 Condos and Coops1 New York Real Estate for Salespersons, 5 th e By Marcia Darvin Spada Cengage Learning

2. © 2013 All rights reserved. Chapter 16 Condos and Coops2 Chapter 16 Condominiums and Cooperatives

3. © 2013 All rights reserved. Chapter 16 Condos and Coops3 Chapter 16 Key Terms  Alteration agreement  Board package  Bylaws  Common elements  Condominium  Condop  Cooperative  Covenants, conditions, and restrictions (CCRs)

4. © 2013 All rights reserved. Chapter 16 Key Terms (continued)  Declaration  Flip tax  Flipping  House rules  Letter of intent  Maintenance  Offering plan or statement  Proprietary lease  Recognition agreement  Share loan  Sponsor Chapter 16 Condos and Coops4

5. © 2013 All rights reserved. Chapter 16 Condos and Coops5 Condos and Coops CC ondo-title transferred by deed CC oop- title transferred through shares of stock

6. © 2013 All rights reserved. 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 Chapter 16 Condos and Coops6

7. © 2013 All rights reserved. What are Shares of Stock? T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 Chapter 16 Condos and Coops7

8. © 2013 All rights reserved. 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 Chapter 16 Condos and Coops8

9. © 2013 All rights reserved. Cooperative Board Application and Interview Preparation Before Scheduling Interview Consider Co-op Board Application Interview Prep The Role Of Time Familiarize Purchaser Package for Discussion purposes Need for total disclosure By purchaser During 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. Chapter 16 Condos and Coops9

10. © 2013 All rights reserved. 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 Chapter 16 Condos and Coops10

11. © 2013 All rights reserved. Documents Needed for the Sale/Purchase of Cooperatives Proprietary Lease Stock Certificate Offering Plan House Rules Alteration Agreements Chapter 16 Condos and Coops11

12. © 2013 All rights reserved. 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 Chapter 16 Condos and Coops12

13. © 2013 All rights reserved. Difference Between a Condop, Condominium, and Cooperative Apartment A condop is a building that includes condominium and cooperative ownership in 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. Chapter 16 Condos and Coops13

14. © 2013 All rights reserved. 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. Chapter 16 Condos and Coops14

15. © 2013 All rights reserved. Offering Plan Size of unit The floor plans The construction The size and materials The plans of recreation buildings The make and model of appliances The scope of the landscaping The land on which condominium is located Chapter 16 Condos and Coops15

16. © 2013 All rights reserved. Offering Plan Amendment: Building Conversion NYS law When 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 Chapter 16 Condos and Coops16

17. © 2013 All rights reserved. Offering Plan Amendment : New Development oNew building and after 90-day tenant’s exclusive period in a converted building osponsor 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 Chapter 16 Condos and Coops17

18. © 2013 All rights reserved. Chapter 16 Condos and Coops18 A Condo and Coop Closing Compared CondominiumCooperative Type of transaction Fee simple ownership Personal property; shares of stock Transfer documents Deed Proprietary lease Taxes at closing NYS transfer tax NYS transfer fee; flip tax

19. © 2013 All rights reserved. Closing Costs Real Estate Tax Deductions Right of First Refusal Mortgage Recording Tax Mansion Tax Common Charges Chapter 16 Condos and Coops 19

20. © 2013 All rights reserved. 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 Chapter 16 Condos and Coops20