Condominiums and Cooperatives

New York is a city comprised mainly of condominium and cooperative apartments, with a smaller selection of homes called townhouses or brownstones. It is important to understand the differences between the two types of apartment found in Manhattan before starting the buying process.

Condo – A condominium is a multiple unit dwelling in which there is separate and distinct ownership of the individual units and joint ownership of the common areas, such as the entrances, laundry rooms, elevators and hallways.

The building is managed by the condominium association, either directly or through a professional manager. The owners of the individual units are jointly responsible for the costs of maintaining the building and common areas and they are individually responsible for the maintenance expenses of their own particular units.

Cooperative – Cooperatives are owned by an apartment corporation and are typically more difficult for international buyers to purchase.

Individuals do not actually own the bricks and mortar of the building, but rather the shares in the corporation that entitle a long term proprietary lease. The corporation pays the building’s mortgage, real estate taxes, employee salaries and other expenses for the upkeep of the  building.

The shareholders then in turn pay a share of these expenses, determined by the number of shares owned in the corporation. Share amounts are determined by apartment size and floor level.

Existing shareholders have the right to approve or reject any potential new shareholders. The board of directors are elected by all the shareholders of the cooperative and interview all prospective new shareholders.

The Purchase Process

Although cooperatives and condominiums are two very different types of apartment, the steps required to purchase are relatively similar.

Submitting an offer

In New York City, offers are made orally by an agent direct to the seller or to the seller’s agent. The seller may counter an offer, beginning negotiations, once a price is reached that both parties agree on, the price terms and closing date are decided upon.

Choosing the ownership structure

Employing a property lawyer who knows the New York market is crucial. There are numerous ownership structures available depending on the purchaser’s needs and priorities.

A lawyer can explain Each ownership structure in detail and help the purchaser choose the most appropriate one for their specific purchase.

Title Search

The purchaser’s lawyer will carry out a title search on the property to ensure the financial checks are satisfactory and that the by-laws of the building are acceptable.

Contract Signing and Deposit

Once the contract has been signed by the purchaser, 10% of the purchase price is usually required as a deposit. The deposit is held in escrow by the seller’s lawyer until the deal is completed. Until all parties have signed the contract and it has been delivered, the seller can still entertain and accept offers.

If finance is being sought, at this stage it should be progressed.

Background & Financial Checks

The purchaser’s agent will pass on the board requirements and application materials, which can be similar for both condominiums and cooperatives, however, the process is quite different.

The materials will need to be completed and typically include: an application form, a financial statement signed by a Certified Public Accountant, and all necessary support documents for your financial statement, namely

1. three years of tax returns,
2. bank statements
3. letter of personal and financial reference
4. letters of professional reference
5. the contract of sale
6. bank documents (if taking out finance / mortgage) indicating the loan is in place.

Once the ‘package’ is complete, it is reviewed by a member of the agent’s management team, and assuming everything is accurate, it is then passed back to the managing agent for review.

Once approved at this level and all credit checks are verified, the application package is then forwarded to the board of directors.

Closing

In the case of a cooperative, if the application meets initial approval, the purchaser would be invited to an interview with the board or with an interviewing committee. This should be treated as a business meeting. After approval by the board, the purchaser can then begin planning for closing.

In the case of a condominium, there is generally no formal interview, the application is reviewed, and if all required materials are included and in good order, approval is typically granted.

The entire process can move quickly in a condominium, and assuming a loan / mortgage can be secured in a timely fashion, the whole process can move from contract to closing in as little as 60 days. The cooperative process is more involved and 60 to 90 days or more is not uncommon. 

Find out how Knight Frank can help you buy or sell property in New York or download the latest edition on New York Inside View.