January 25, 2003

1. What is a cooperative?

1. Cooperative generally connotes an apartment building in which the owner holds title to all premises and grants rights of occupancy to particular apartments by means of proprietary leases.

2. A cooperative apartment consists of Dwelling units in a multi dwelling complex in which each owner has an interest in the entire complex and a lease of his own apartment, though he/she does not own his apartment as in the case of a condominium.

3. In a cooperative you own stock in the cooperative corporation, assigned to a particular apartment. As a result of your ownership of stock, you are entitled to occupy the apartment, upon your signing a lease, known as a proprietary lease.

What is a condominium?

1. A single real property parcel with all the unit owners having a right in common to use the common elements with separate ownership confined to the individual units which are serially designated.

2. A condominium is an estate in real property consisting of an undivided interest in common in a portion of a parcel of real property together, with a separate interest in space in a residential, industrial or commercial building on such real property, such as an apartment, office or store.

3. In a condominium you have a deed to the unit. This is an interest in Real property, similar to a one family home. However, in a condominium, in addition to owning your home you have a right to use in the common areas (e.g. community facilities, laundry room, parking, halls)

2. What are the differences between a cooperative and a condominium?

Governing documents:

1. The cooperative is governed by an elected Board of Directors whose powers are derived from the certificate of incorporation, by-laws, rules and regulations and the proprietary lease.
The cooperative Board of Directors makes all financial decisions as to the rent paid by each shareholder, the maintenance, upkeep of the building, the mortgage, rights of sublet, who will be approved for purchase, repairs and alterations of individual apartments and payment of all building expenses.

2. The condominium is governed by an elected Board of Managers whose powers are derived from a Declaration of Condominium and By-laws.

The condominium Board of Managers makes financial decisions as to common charges (maintenance costs for the common areas, but not for the costs of the individual unit) In a condominium the unit owners may mortgage the unit, similar to a one family home mortgage and he/she pays the real estate tax on the unit. In a cooperative the cooperative corporation pays the mortgage and real estate taxes on the entire building.

The condominium Board of Managers usually do not have decision making powers as to sale or sublet of the unit to whom it may be sold or as to repairs and alterations within the particular unit.

3. Attorneys role :

3. Retaining an Attorney
4. Services of an Attorney

1. Offering Plan and Amendments
2. Declaration of Condominium
3. Review By-laws and Rules and Regulations
4. Review the Proprietary Lease
5. Financial statements
6. Board of Directors minutes of meetings
7. Purchase Money Loan
8. Contract of Sale
9. Closing of Sale

4. Buyers Due Diligence

1. Read and review the application proposed by the Board of Directors or Board of Managers of the cooperative or condominium
2. Review personal credit (e.g. the amount of loan you qualify for, income vs. income required by cooperative, outstanding debt and budget)
3. Review By-Laws and Rules and Regulations with Attorney
4. Review Rules of cooperative or condominium regarding pets, guests, alterations, repairs, noise, nuisance, musicians, sublet policies, home occupations¹ , home care and/or transfer of stock to a living trust
5. Review Proprietary lease in detail with Attorney
6. Review financial statements with Attorney
7. Review and investigate cooperative/condominium history (e.g. number of owner-residents, number of investment apartments, maintenance (rent) vs. maintenance (rent) of comparable units in other cooperatives/condominiums, assessment history, construction and rehabilitation and major capital improvements)
8. Engineering inspection and report
9. Review physical plant with regard to windows, heating plant, roof facade, hot water system, plumbing, electrical system, lobby, halls and elevators
10. Take a tour of the building at different times, (e.g. morning, night, weekends)

5. Review your physical needs
(e.g. disabilities (mental/physical) requirements)
(e.g. Reasonable accommodation under Civil Rights Law)

6. Meet with current owner and determine the following:

1. Length of time lived in the building
2. Inquiries regarding neighbors and/or noise
3. Inquire about specific problems in the apartment (e.g. appliances, electric)
4. Inquire about history of the building regarding financials, maintenance and/or assessments
5. Inquire about the mortgage on the building
6. Inquire about violations (e.g. lead paint, mold, asbestos)

7. The contract of sale

1. Identify owner
2. Maintenance and assessments
3. Number of shares
4. Sale by Estates, due to divorce and/or sale through power of attorney
5. What personal property is included and excluded and the condition thereof
6. Closing date
7. Board Approval
8. Availability to close of buyer/seller
9. Closing costs: Buyer vs. Seller (e.g. maintenance, insurance, cooperative/condominium fees, bank charges, title co.)
10. Closing (e.g. cancellation of contract, time of essence)
11. Obligations of purchaser for alterations made by seller as to maintenance or restoration
12. Financing contingency
13. Possession of unit on closing
14. Managing agent

8. Lien/Title Search (report on cooperative/condominium, buyer and seller)

1. Liens, judgments
2. Tax liens
3. Stock pledges and/or outstanding debt by seller
4. Unit mortgaged or liened
5. Title Insurance

9. Bank loans

1. Pre-approval of applicant and/or cooperative or condominium property
2. Shopping for a loan
3. Term of loan
4. Lock-in interest rate
5. Closing costs
6. Pre-payment privileges
7. Fixed Rate of Interest vs. Variable Rate of Interest on loan
8. Loan requirements and/or restrictions by cooperative/condominium

10. Cooperative board approval

1. Application must be complete on submission, including financials, personal references, financial references, proof of income, copies of any and all documents, tax returns, bank statements, payroll stubs or 1099's
2. The interview (you interview each other)
3. Discuss the application and interview process with your real estate broker regarding the particular needs and requirements of this Board of Directors or Board of Managers
4. Board discretion regarding approval

1. Denial of approval for any reason or no reason
2. Civil rights issues (e.g. denial based on race, creed, color, national origin, marital status, disability, age, sexual orientation, occupation and/or gender)

5. Right of First Refusal in cooperatives/condominiums
6. Cooperative’s option to purchase the unit

11. Closing of sale

1. Pre-closing inspection of the unit (two (2) visits)
2. Attempt to procure and review bank documents in advance
3. Financial issues (adjustments, funds required)
4. Possession of unit on closing
5. Pre-closing conference with Attorney (documents, checks, problems, insurance)
6. Insurance
7. Alteration (e.g. assumption by buyer of seller’s alterations)
8. Closing statement

CONCLUSION:

1. Hire competent professionals (e.g. real estate broker, attorney, banker and title insurance company);
2. Act in a proactive manner throughout the process;
3. Purchasing a cooperative apartment or condominium home can be personally and financially rewarding.

¹ A Home Occupation is a commercial or professional occupancy which may not exceed more than 25% of the total area of the unit and in no event more than 500 square feet of floor area (e.g. fine art studio, professional office or instruction of not more than four (4) pupils simultaneously or if musical instruction, not more than a single pupil at a time.

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