© 2013 all rights reserved. chapter 16 condos and coops1 new york real estate for salespersons, 5...
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© 2013 All rights reserved.Chapter 16 Condos and Coops 1
New York Real Estate for Salespersons, 5th e
By Marcia Darvin SpadaCengage Learning
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Chapter 16
Condominiums and Cooperatives
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Chapter 16 Key Terms
Alteration
agreement
Board package
Bylaws
Common elements
Condominium
Condop
Cooperative
Covenants,
conditions, and
restrictions (CCRs)
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Chapter 16 Key Terms (continued)
Declaration
Flip tax
FlippingHouse rulesLetter of intent
MaintenanceOffering plan or
statementProprietary leaseRecognition
agreementShare loanSponsor
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Condos and Coops
Condo-title transferred by deed
Coop- title transferred through sharesof stock
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Cooperatives
A cooperative corporation usually owns the land, buildings, and property rights and all interests
The title to the property, as shown on the deed, is in the name of the corporation
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What are Shares of Stock?
The shareholders do not own real estate, but a proportionate number of shares of stock in a cooperative corporation
As lessees, the shareholders pay a monthly maintenance fee-the rent
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Key Issues to Review in a Co-op Board’s Minutes
Maintenance and Assessment History
Underlying Mortgage
Reserve Fund
Many cooperative reserve funds receive income from the flip tax, a charge levied when units change hands
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Cooperative Board Application and Interview Preparation
Before SchedulingInterviewConsider
Co-opBoard
Application
Interview Prep
The Role Of Time
FamiliarizePurchaser Package forDiscussion purposes
Need for total disclosure
By purchaserDuring
Interview
Real Estate Example: Why?Dr. Leslie is a single woman who is paying cash for a cooperative. She has sizable and safe investments and no debt. The cooperative board refuses her. No reason is given.
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CPS1 Phase: Cooperative Policy Statement
• Sets out New York Attorney General’s rules • how a developer
may test market for a new development before filing the offering plan and before construction is completed
• The CPS1 period • lasts 120 days
from acceptance of the CPS1 statement by the Attorney General
• can be extended by request from the developer for an additional 60 days
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Documents Needed for the Sale/Purchase of Cooperatives
AlterationAgreements
House Rules
Offering Plan
Stock Certificate
Proprietary Lease
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Primary Residency Versus Subletting Issues In the Cooperative
Primary resident owner of the cooperative unit
Subletting allows tenant shareholders more flexibility in
ownership board may limit the length of time a tenant
shareholder can sublet a unit
If the sponsor owns the shares allocated to the apartment, he may be permitted under bylaws or rules to sublet or rent a unit even though a unit owner cannot
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Difference Between a Condop, Condominium, and Cooperative Apartment
A condop isa building that includescondominium and
cooperative ownershipin the same structure
Real Estate Example: Why it is created?
Building owner Sal owns a multi-unit apartment building that includes a store on the street level. Sal records the Declaration of Condominium, dividing the property into two condominium units: Condo A (the commercial unit) and Condo B (the residential unit). Sal continues to own fee title to the commercial condominium unit and collects rent from the store. As fee title owner to Condo B, Sal deeds the residential unit to Big City Co-op Corp. in exchange for the shares of Big City Co-op Corp. Various blocks of shares are allocated to the different apartments. Sal now sells the block of shares allocated to each unit (together with a proprietary lease) to individual purchases.
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Condominiums A structure of two or more units Interior space is individually owned Common elements, are owned by owners
of the individual units To create, the owner/developer of the
property signs a condominium declaration
Shareholder’s rights and obligations are in the condominium’s bylaws
The sponsor is the owner or developer.
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Offering Plan
Size of unit
Size of unit
The floor plansThe floor plans
The constructionThe construction
The size and materialsThe size and materials
The plans of recreation buildings The plans of recreation buildings
The make and model of appliancesThe make and model of appliances
The scope of the landscaping The scope of the landscaping
The land on which condominium is locatedThe land on which condominium is located
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Offering Plan Amendment:Building Conversion
NYS lawWhen a developer files an offering plan
with the Attorney General to convert an existing building to a condo or co-op, the tenants have a 90-day exclusive right to buy their apartment
During this period sponsor cannot negotiate separate prices
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Offering Plan Amendment :New Development
o New building and after 90-day tenant’s exclusive period in a converted building
o sponsor can separately negotiate the price of a particular apartment
o The developer can sell one apartment for $200,000 and then sell another identical apartment for $175,000
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A Condo and Coop Closing ComparedCondominium
Cooperative
Type oftransaction
Fee simpleownership
Personal property; shares of stock
Transfer documents
Deed Proprietary lease
Taxes at closing
NYS transfer tax
NYS transfer fee; flip tax
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Closing CostsReal
EstateTax
TaxDeductions
Common Charges
Mansion Tax
MortgageRecording
Tax
Right of First
Refusal
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Flipping Real estate
investors or speculators believe that they can turn quick profits by buying the property at a certain price and then immediately selling the property at a higher price
Flipping may be a problem because it can drive up prices
The investor attempts to buy low and sell high
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