ANSWERS TO COMMON QUESTIONS ABOUT BUYING A RESIDENTIAL COOPERATIVE OR CONDOMINIUM IN NEW YORK CITY


I'm new to NYC.  What is a cooperative?

There are all kinds of residential properties in New York City.  Each has its own unique legal features.  The most common kind of residential property is a cooperative or co-op.  Co-op's are found in few other places outside New York City.  Here they are a centuries old form of property ownership.  Many of the most highly regarded residential buildings in New York are co-op's.  


How is a Co-op different?

In a co-op you are purchasing shares in a corporation.  That makes a co-op a sort of legal hybrid between real and personal property.   The shares are allocated to a specific apartment pursuant to another document called a "proprietary lease".  That’s the document that provides that while you own the shares you may occupy the apartment.  A co-op is run by a group of shareholders annually elected called the "board of directors".  The board of directors, like a condominium's board of managers, sets the monthly fee to cover the common expenses called the "maintenance" which in a condominium is called common "charges". 


What does it mean to say that a co-op board of directors most approve my purchase?

Most, not all, co-op's require that the board of director's approve the prospective purchaser.  They often require a rather extensive application that can far exceed that required by your mortgage lender (for example personal reference letters are a common co-op board application requirement).  Each co-op has its own application.   Your real estate broker is an invaluable resource to help you prepare your co-op application.  Often you will have to make extensive copies of the application for all board members which can amount to hundreds of pages. 


What is a co-op board interview?

Most co-op's will also require you to attend a personal board interview, where they can meet you and ask you questions about your application. 


What do co-op rules and regulations refer to?

Each co-op also has its own rules and regulations governing ownership.  It's important to understand what they are before you sign your contract.  For example, some co-ops permit subletting, leasing out your property to others, with certain approvals.  Others have a blanket prohibition against subletting. 


Why do buyers choose co-op's as opposed to condominium ownership?

Co-ops are a tried and true form of property ownership in NYC.  They have been around much longer then condominiums and while new condominiums are being constructed every year, co-op's continue to make up the overwhelming majority of the residential market in Manhattan.  While the application and interview process can be a burden they insure that your fellow owners are financially sound and have made a significant investment into the building.  


Do condominiums in NYC differ from those in other locations?

Like in most other regions of the country a condominium in NYC is a lot like a single family home in that each apartment is a separate property with a portion of the common elements (for example hallways, lobby, etc.) allocated to it.  The board of managers runs the affairs of the condominium and deals with the common elements.  Most condominiums have a "right of first refusal" or the right to purchase the property in your place as buyer; a rare occurrence and one where your contract will provide that you will get your downpayment back.   There are many different types of residential condominiums in New York City, each is unique. It's important that you meet with your attorney and understand the features of the property that you are buying before you sign the contract.


I have been told that the seller has accepted my offer. Is this binding?

Offers for the purchase and sale of real estate must be in writing (called a contract) to be legally binding.  It is important to understand this and that is why it is also important to move quickly between accepted offer and contract signing.  It is equally important to never create any written agreement that discusses the purchase and sale of property until it has been thoroughly reviewed by your lawyer.  Once the contract is executed and other legal requirements are met, then the parties have a legally binding agreement. 


Are there differences in the costs associated with buying a co-op as opposed to a condominium?

Yes.  In general the closing costs associated with a co-op are less.  That is because with a co-op, unlike a condominium, there is little title cost.  There are also other taxes and fees paid in connection with recording documents and mortgages that are not present with a co-op purchase.


What is due diligence?

Once your verbal offer has been accepted, your attorney will conduct a very important review of the building whether co-op, condo or other form of ownership.  This is important so that you understand any limitations or draw-backs to the property you are purchasing, like a planned increase in common charges or a pending lawsuit that might effect your interests in the future.  These are the kinds of things that your lawyer will be looking for in the due diligence process prior to your signing the contract of sale.  


How is the contract executed?

Customarily the purchaser signs first, and makes a downpayment on the property (usually 10%) of the purchase price.  This money protects the seller in the event you where to back out of the transaction.  In this case, the seller would usually be entitled to the downpayment and could sell the property to another party.  


What is a Mansion Tax?

In New York State purchasers of properties exceeding one million dollars in value are subject to a tax of one (1%) on the gross purchase price. 


How should I handle my co-op board interview?

Click this LINK for our guide to navigating co-op board interviews.


What happens at the closing?

Once you have received your mortgage, if you are financing your purchase, and as soon as co-op or condominium approvals are in hand you can move to closing.  Immediately before the closing you will be asked to inspect the property customarily called a "walk through"  to make sure that the property has been left in the condition required by the contract.   At the closing with your lawyer you will sign all the transfer documents and take title; with a condominium that means a deed will be executed and in a co-op that means a stock certificate and proprietary lease will be issued.


If I'm buying new construction does that change anything?

Yes. With partially constructed properties, or in some cases with construction not even started at the time the contract is signed, an examination of the offering plan must be made so that you understand how the property will be finished and how it will function once completed.  There are also different costs associated with the purchase of new construction that can vary property to property and your lawyer can help you understand those unique costs.

THIS PAGE IS INTENDED TO PROVIDE GENERAL INFORMATION ABOUT THE PURCHASE OF CERTAIN TYPES OF REAL ESTATE IN NEW YORK CITY.  EACH REAL ESTATE TRANSACTION IS UNIQUE.  ALWAYS CONSULT WITH A LAWYER BEFORE MAKING ANY DECISION RELATING TO THE PURCHASE OR SALE OF REAL ESTATE OR RELYING ON ANY INFORMATION IN THIS PAGE.