Here are some tips for the prospective purchaser of a cooperative apartment.
Not owning real estate
As owning a cooperative unit really means owning shares of stock in a cooperative corporation with a right to a proprietary lease to a particular apartment, as opposed to actually owning a parcel of land, some people are swayed away from this investment. First, the buyer must decide if this form of property ownership is acceptable.
Documentation
The buyer should review the following documents relating to the cooperative unit:
- offering plan and by-laws: this bulky book will discuss the formation of the cooperative corporation and the powers of the board of directors. The buyer can discover the rules regarding subletting an apartment, transferring shares, and other rules;
- house rules: this document, which is usually several pages long, lists rules relating to day-to-day living at the building, including pet ownership, access to common areas, and maintenance of the hallways, etc.;
- last two years’ financial statements: these statements will provide good snapshots of the financial health of the corporation. The statements will advise as to any mortgages on the property, the assets and income of the corporation, and the expenses of operation of the building.
Unit charges
Charges relating to the purchase of a cooperative unit can be for:
- maintenance charges;
- building-wide assessments (which may be for a specified term, and which may be signs of a tenuous corporation);
- electricity/air-conditioning;
- “flip” taxes — charges imposed by a cooperative corporation upon the transfer of a unit, which may be imposed (depending on the by-laws) upon the seller or the buyer of the unit.
Board approval
One should become familiar with the board of directors, who must give approval of the sale. While this is sometimes perceived as one of the drawbacks of cooperative apartment ownership, the board’s basis for denial may be for many reasons, including those that maintain the value of the cooperative corporation.
copyr. 2014 Richard A. Klass, Esq.
The firm’s website: www.CourtStreetLaw.com
Richard A. Klass, Esq., maintains a law firm engaged in civil litigation in Brooklyn Heights, New York.
He may be reached at (718) COURT-ST or e-ml to RichKlass@courtstreetlaw.comcreate new email with any questions.
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