There is definitely one pro to purchasing a coop in New York City:  The Price.  Often Coops in New York City are listed at a lower purchase price than a traditional condominium unit or town house.  The reason for the lower purchase price is generally because of the challenging process of purchasing a coop. 

Before we get to Do’s and Don’ts of purchase a Coop in New York City, let me give you a  basic overview of a Coop.  Technically, the purchase of a Coop is not the purchase of “real property.”  In other words, when you buy a Coop, you are not actually purchasing the land and/or structure on the land.  If you purchase a traditional home, you would be acquiring the structures on the land (the house and any annexes, such as, a garage, pool house, barn, etc) and the land itself.  However, when purchasing a Coop, you are not purchasing the structure and the land; instead, you are purchasing shares in a corporation.  The value of the shares you purchase is generally equal to the size of your unit with respect to the overall Coop.  

Now that you understand that you are purchasing shares in Corporation, instead of real property, there are some Do’s and Don’ts that you should know before purchasing.

DO’s

          DO RETAIN A REALTOR.  Although not require, it is best to find a reputable realtor to assist you with the purchase of a Coop.  Unlike purchasing a traditional home, there will be a list of requirements mandated by the Board of Directors (the “Board”) before you are even under contract.  Generally, the Board will require financial information, such as tax returns, bank statements, accountant letters, etc.  Also, the board will like require letters of recommendation, completion of an application, application fee, etc.  Your realtor will assist you with gathering the information for the board packet/application.

       DO PREPARE FOR THE BOARD INTERVIEW.  At some point in the early stages of the purchase, the board will require you to attend an interview.  It is less like an interview and more like a Senate hearing.  There will be a panel of board members who have already reviewed your application and board packet.  They will ask any number of questions to get a better understanding of whether you would be a good fit for the Coop. Your Realtor should be able to assist you with preparing for board interview.  In addition, you can also google the most likely Coop board interview questions to give you an edge.  It can be a nerve-racking process, but keep in mind that it is as much an interview for them, as it is an interview for you.  Feel free to ask questions about food deliveries to your door, overnight guests, who is allowed to live in the unit, subletting the unit, etc.  You might find after the interview that the Coop is not the right fit for you.

       DO RESEARCH THE COOP.  Do a cursory online search for the Coop to see what media coverage, if any is on the internet.  You can usually find any court cases where the Coop was either the plaintiff or defendant.  Also, you will find any negative or positive media on the Coop.  Doing an internet search will allow you to spot any glaring red flags associated with the Coop.

       DO HIRE AN ATTORNEY FAMILIAR WITH NYC COOPS.  While spotting the glaring red flags may be easy to most people, the nuances are more challenging.  There a many nuances with purchasing a NYC Coop that do not exist when purchasing traditional property.  An attorney familiar with NYC Coops will be aware of these nuances and be better prepared to address them.  An attorney will request and review the corporate documents and financials of the corporation.  In addition, the attorney will review the Contract to ensure that you are not signing your life and rights away, just to name a few.  There are many other nuances that the right attorney will assist you to effectively navigate.

DON’TS

       DON’T MAKE ANY UPFRONT PAYMENTS.  Other than the application fee, it is not advisable that you make any upfront payments or provide any upfront deposits.  There is generally an application fee (which should also cover the background check) associated with every Coop application.  The fee is generally required to begin the process.  However, do not provide the deposit amount or any other large sums of money at this stage.  All transfers of large sums of money should go through your attorney and those fees should be held in escrow.

       DO NOT IGNORE YOUR INTUITION.  If the purchase seems too good to be true, it usually is.  In addition, if your interaction with the Coop board members, the listing agent, the Management Company, etc. seem off, then trust that feeling.  Coops have been known to market and sell units even though the financial situation of the Coop is in peril.   Coops will finalize a sale with overdue taxes and water bills.  After the purchase, you will then become responsible for the overdue bills of the Coop.  Simply put, trust your gut!

          DO NOT MAKE ANY ORAL AGREEMENTS.  Needless to say, it is important to avoid signing documents without an attorney reviewing the documents beforehand.  However, it is also important to avoid agreeing to anything without discussing it with your attorney.  There are certain taxes (ie:  Flip tax and Mansion tax) that can be negotiated as a seller obligation.  In addition, the payment of any assessments may be negotiated between the purchaser and seller. It is best if you leave the negotiable items of the deal to the experts!  

       If you are in need of an expert legal advice for your coop purchase, please feel free to contact our office at info@lawdlf.com.

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