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May 14, 2009
C of O Issue
We just bought an old 2 family house that I understand had a C of O where the building didn't have to state the living units because it was grandfathered. Now, we're closing a lingering open permit and our architect is wondering if we want an official two family C of O.
What are the pros/cons of having one without living units stated versus one having them stated? Thanks!
Comments
Mine has a C of O for 2 but I use it as one. People who know these things have told me that, while I pay a higher tax for the 2 designation, it is desireable if I were ever to sell.
Posted by: Arkady at May 13, 2009 5:32 PM
I don't think it matters at all. Most older houses have no c of o's if they continue to be used as single and two-family homes.
Also, the minute you try to do this, the city will become suspicious of your motives and descend on your house and probably give you 8 to 20 violations. Your architect should know that.
Posted by: sam at May 14, 2009 10:42 AM
The main advantage of having the house designated as a two family only occurs when you go to sell. The banks will allow up to 70-80% (lower in this climate) of the rental income to be applied to the mortgage based on market rate. So, if the market rate for the rental is $1500 a month, the buyer can add over $1000 to his/her qualifying income. This opens up the pool of potential buyers because on a 30 year mortgage it translates about an extra 200k. Of course this is in the simplest terms, other factors come into play - but you get the idea.
Arkady - you do not pay more tax for the "2" designation. 1,2 & 3 family houses are all in the same class and taxed at the same rate. Only if the designation allows for a higher assessment (unlikely) would there be any difference.
Posted by: WrathOfGates at May 14, 2009 10:49 AM
Arkady, I'm not sure you are paying a higher tax. My house is the only house in my area built as a 1-family; it predates C of Os, but is listed in all tax and city documents as a 2-family. I spent a long morning at DOB once tracking down the answer: tax rates are the same on 1-4 family buildings and there would be no advantage to changing my status to the correct 1-family. The gentleman at DOB who actually understood the regs and was polite enough to explain them did make the point you make--it's better for resale to be recognized as a 2-family.
Posted by: lf2009 at May 14, 2009 10:50 AM
lf2009 -
1-3 family houses are taxed at the same rate (Class 1)
4-10 family buildings are taxed alike (Class 2)
I believe buildings with more than 10 units belong in Class 4.
Posted by: WrathOfGates at May 14, 2009 11:12 AM
Thanks for input. It's one of those things I just tucked away as a nag but it's nice to know it's not so.
Posted by: Arkady at May 14, 2009 11:18 AM
WrathOfGates: you also should mention, that banks usually ask higher ARP on mortgages for two family houses.
Posted by: bobjohn at May 14, 2009 12:59 PM
We are trying to refinance our mortgage and have found the rate about .5% higher because it's a legal 2 family rather than a one family. This was consistent across lenders.
Posted by: trudylou at May 14, 2009 1:23 PM
thanks all - its definitely a two family so the issue isn't whether its a 1 or a 2 family but whether its beneficial to have a C or O or NOT have one (grandfathered.)
Sam, are you saying if I change it from what it was (nothing) to a formal 2 family C or O they'll get suspicious?
Posted by: gowanusgus at May 14, 2009 1:26 PM
BobJohn -
Owner occupied 2-3 family houses should qualify for the same ARP...at least that is what I found when I was shopping around for my mortgage.
Posted by: WrathOfGates at May 14, 2009 2:57 PM
Oops...APR. I purchased a few years back so like everything else maybe this has changed.
Gus - if the house is already a two family and set up in a legal fashion (means of egress, etc.) then there is nothing harmful about having the designation changed. Check with your architect regarding any possible violations.
I prefer to be proactive in such matters. For instance, if some issue arises with a difficult tenant and he/she decides to call the DOB who knows what will be found? You are then stuck with making the necessary alterations on top of paying the violations plus the loss of the rental income.
Posted by: WrathOfGates at May 14, 2009 3:07 PM
changing a c of o in Brooklyn is a big deal. and yes, it is almost like they get suspicious of your motives.
avoid the process unless you have to, and it sounds like you don't have to.
Posted by: sam at May 14, 2009 4:21 PM
I have the opposite impression from sam. My house was grandfathered but I recently had it legalized. It wasn't a hassle at all (other than annoying scheduling for the inspection).
Posted by: geekspice at May 14, 2009 4:53 PM
And my experience was something between sam and geekspice. Even if what was done was legal in the past, you have to meet current code for a C of O.
There were a few things (totaling about $1000) that I had to do to pass inspection. As long as you're currently grandfathered, I don't see any benefit in a new C of O except to the architect. I did it in conjunction with building a new addition so I had no choice.
Posted by: jfss at May 14, 2009 7:11 PM
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