Info on co-ops?
Hi There! I’m looking to buy a place in Park Slope. I’m looking to buy in a small building and some of the rules are confusing. Can people tell me about their experiences with co-ops?
fogduykkpnagxs
in General Discussion 3 years and 10 months ago
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resident2 | 3 years and 10 months ago
A Condo board does not have the authority to enforce things like owner occupancy etc. They have to resort to Supreme Court actions all the time & only if they get a majority of all the owners to agree to them spending money in that way. A Co-OP board can & should go ahead with eviction proceedings to collect maintenance or enforce nuisance complaints, authorize subletting etc.
Well managed Condos will use the right of first refusal option to keep too many investors out, not by buying the unit, but by asking for more & more information until the buyer backs out.. that is pretty much the only leverage a Condo Board has.
A well managed, well maintained Co-Op is a much better bet for a home than a Condo is in my opinion, the larger less personal the better. But cutting up smaller buildings will only work as a Co-Op, but be aware of the personal/management pitfalls. Smaller Condo buildings often become a standoff & no one being able to sell.
andriywww1990 | 3 years and 10 months ago
@resident 2; that explains a lot. i have spent more than 1/2 my life thinking a condo was the way to go and you just changed that in five minutes.
so i wonder something: you state a “coop board can and must…”. does that mean if a condo board does not make decisions that protect the asset because the owners say “no”, is the board indemnified and the owners themselves become responsible? so people suing a condo board are really suing themselves (or an estate) because the owners, not the board, held the board’s hand and prevented them from acting? and does that mean as shareholder in a coop, are the owners indemnified just as shareholders are in a for profit corporation?
resident2, i have only asked you the above questions as a matter of discussion. i do realize that you may not be a lawyer (and i hope you are not if i am asking things like this of you on here) and that laws vary across jurisdictions. i will respect anything you say and will not rely on it any more than the weather report and hope others would do the same.
resident2 | 3 years and 10 months ago
When you buy a Co-Op you are buying stock/shares in the company that owns the building. That said the CoOp board has much greater controls over the building & residents than a Condo Board does. When you buy a Condo you are buying a piece of Real Estate & a proportionate share in the common areas of a building.
A Co-Op board can & must make decisions to safe guard the Building the value of stock & its residents. Condo Boards cannot. They often need a majority of owners to agree to making capital improvements, I have often seen Condo Boards kicking such things down the road because they cannot get enough owners to cough up their share of Capital needed.
A well run Co-Op will be adding to the reserve fund on a monthly or at least annual basis to have money available to replace, the roof, windows, boiler etc. Most Condo’s do not and individual owners need to cough up lump sums of cash.
A Co-Op board can evict nuisance, delinquent owners/residents. A Condo cannot.
When you buy into a co-op, you should get at least 3 years financial statements & as many minutes of meetings as your Attorney feels they need, normally 6-12 months. Condos you typically do not. From the minutes of meetings you can generally see if there are problem residents, from the financial statements you can see how much they are collecting to make repairs, upgrades etc & literally see where the monthly maintenance is going.
Co-OP maintenance includes Real Taxes on the whole building + Insurance, often Heat & hot water & a capital improvement/reserve fund amount so that the building does not need to collect cash each time the building needs something.
As many of the “new” 15-20 year old Condo buildings are coming to the end of their Tax abatement, many have huge monthly tax bills, especially those that did not challenge their assessments each year : “because we don’t pay RE Tax!”
The bottom line is, you can find out far more about a Co-Op building before you buy than you can about a Condo building. And a Co-OP is easier to get back onto the straight & narrow with good management than a Condo Building is.
Larger buildings are always easier than smaller buildings full of ego maniacs.
andriywww1990 | 3 years and 10 months ago
in light of recent events, if i were buying a coop, i would treat the purchase of that property the same way i treated the purchase of my house (or a used car) and that is, i am buying something that may or may not have been maintained properly and as the purchaser, i am assuming all of the risk that comes with such a purchase. i would not assume that previous boards and management were competent (as with my house, i am pretty sure that some of the previous owners were incompetent). nor would i assume that the current board would be able to correct those things and if i saw a poorly maintained building, i would assume that the current occupants have not the will power nor money to do anything about it and that it will probably not get any better going forward and may get worse. when dealing with owners and boards (and i have been there), these are very safe assumptions; it is them and you will not be able to change it (you will become part of it). My assumptions may be wrong, but with the biggest investment you will be making in your life, err on the side of cautio n.
In bigger buildings, strong professional managers are a big help. and a maintenance team that knows how to recognize problems early on and who are not afraid to report those problems to the powers that be as soon as they see them (keep in mind, if a bad relationship exists between say the president of the board and they guy crawling in the basement fixing a broken pipe, something that does not look right may not get reported until it is too late). if you look at a bigger building, not a self managed 4 family, look at the management company. a really good manager can cut through a lot of the dysfunction in the building and rise above the infighting and get stuff done. they can say to the owners “this is what is going to happen if we do not do something about this now” and i watched a manager say to the board “i will walk if you do not stop this non sense”. The manager i am speaking of was a “registered parliamentarian” and at every board meeting there was a copy of Roberts Rules or Order.
when we bought this house, we got an engineer’s report. i forget at what point we got that report and i am not sure if someone can pull out of a contract if something serious is found but i would get an engineer’s report and see if that jibes with not only the reserve fund but with what the real estate agent (and never trust them) and others involved with the building are telling you. but let me add this; you have to read the report. i did not read mine until six months after we moved into the house and if there was something really wrong, it would have been too late.
i do realize what i just said here seems very obvious right now to many of us. but a lot of people who have never dealt with boards and owners may not understand the dysfunction and how that can lead to the disaster that just occurred.
for those wondering what gives me, the owner of a tiny little contracting business, the “right” to say these things, the management firm i worked for right after college had taken over a “distressed” property, a property that had been turned over to the HOA when the developer went bankrupt before completing the entire project. this left the owners very distrustful of anyone and some resented some of the expenses that were being incurred to deal with things the developer should have taken care of and some hated the board which was basically saying “this is what has to be done (spent) to protect our investment”. The president of the board was determined and my boss was a strong manager; i just checked last night – the units at that condo are selling for about 5 times what they were when i worked there 30 years ago so the hard work appears to have paid off – although the grass is a lot browner than when i worked there.
andriywww1990 | 3 years and 10 months ago
there was an article on line last night that discussed reserve funds and how they should be built. and even though i worked for a management company, i was a field person and i often heard about the board members talking about the “reserve fund” but i did not give it much thought until last night.
the reserves are budgeted by figuring out the useful life for the major ticket items and what those items will cost when they come due and dividing it down annually and then monthly per unit and that cost should be added to the monthly fees and that money should be banked. if a building is not doing this for each and every big ticket item, there will be an assessment.
i looked at a unit in a building in Forest Hills some twenty years ago and the outside brick work was going to need pointing in the not so distant future. i thought about the situation and figured that the pointing would lead to a huge assessment and hence, I was not interested in the apt (because i had watched a group of owners vilify a board for wanting to increase the reserves where i worked). i just drove by the building a week ago and the pointing had been done, sometime within the past five years. we liked the apt and the location and had i been wise, i would have asked to see the books and looked to see what reserves they had for the big ticket items (and they have to have reserves for each item, this is not something people can “guess” at or “borrow” from to fund something they did not think about; it will take a professional property manager in a larger building). perhaps they were in good shape and perhaps i would have put an offer in on the unit.
when all this goes wrong in a building (and the place i once worked did not have an adequate reserve fund), those who want to save for a rainy day will be pitted against those who prefer to kick the can down the road and they all turn on the board and blame them and really, it is not the board’s fault (the board is getting sued in Florida: they are suing the people who wanted to do the right thing). this is why reserves are so important – because no one out there, not the savers or the kick the can down the road person – wants an assessment (some people gamble that they will pass away before the big ticket items come due and then when they are still alive, they are furious; a board cannot win with some people).
i will venture to say that if a building has adequate reserves and the current owners understand the importance of that fund and all agree up front that assessments are a bad thing and saving is a good thing and your thinking is the same (you are a “saver”) then relationships in that building may be quite harmonious. i am only guessing at this because from what i have experienced, the biggest issues are not over what color to paint the common hall hallway or who takes the trash out, or what color to paint the doors, but the biggest issues are money.
andriywww1990 | 3 years and 10 months ago
i once worked for a management company and can tell you some things. i also work as a contractor now and when coops call, i know exactly what is going on on the board when people do not want to spend money.
First, check the finances and look at the building. make sure they have the reserves to cover upcoming maintanance – the big things that must be done (the ones that if you avoid them, they just get more expensive to fix)- like reroofing or pointing the exterior brick work. if they do not have the money to cover these things and you know it has to be done, that means a big assessment. are the owners and board willing to approve an assessment or would they rather let the building fall down? some boards and owners would choose the latter.
look at the ownership in the building and what their plans are. so maybe you have young families who bought there when the children were babies and they are now situated in elementary school and the parents are deeply connected in the community. these people might remain their until their children are out of college (they might retire there) and they will be worried about their investment and protecting the asset and they will pay for maintenance. but i hear the opposite all the time and they have said it to me: a 85 year old will say to me “why should we spend 10K to restore the front doors in the building when i won’t be here in 5 years”. i had a call from someone this past spring who told me that she “and her immediate neighbor want do do the work but two other units totaling more than 50% of the vote (the majority owners) are over riding the minority owners and will not spend the money”. the people stopping the project were in their 80’s. and all of us see this mentality with people we know, they stop maintaining their houses (or their country) even when they have money because they know it will be someone else’s problem in a few years. look for young, progressive, and forward thinking people to live around. look for people who see the big picture and who care.
i can go on and on about how boards and owners make mistakes and it is often over pennies that end up costing them a lot of money.
.
helen40
in General Discussion 3 years and 10 months ago
Unless you want to work VERY closely with your new neighbors and take on a lot of work yourself, or pay a high maintenance, I would stay away from small co-ops as this is likely your biggest investment. I have experienced one horror story pre-closing (we ran from the deal) and many others from friends who live in small co-ops now. From my perspective, a small co-op gives you all of the headaches and very few of the benefits a larger co-op can provide. It can work, but it requires lots of cooperation and a building that has been well-maintained over the years.
brokelin | 3 years and 10 months ago
Oh, and I meant if you have questions about why coops in general tend to have certain specific rules, feel free to ask here …
cate | 3 years and 10 months ago
Also lenders may avoid buildings with less than a substantial number of owner occupants, buildings where one entity owns a substantial number of shares/units, and loans for units in buildings with four or fewer units. Also watch out for expiring tax breaks in condos, expiring ground leases, and welcome a co-op with its underlying mortgage paid off because maintenance may be less.
cate | 3 years and 10 months ago
Good luck!
fogduykkpnagxs | 3 years and 10 months ago
That all makes sense, thank you for the comments! The search continues
cate | 3 years and 10 months ago
I bought in a building with about 80 units in Queens, it was well run by the time I arrived with a great super. I had absolutely nothing to do with running anything. They did seem to have a few charges for this and that, like a moving in and out fee. Maintenance was reasonable and the building had a large reserve. Co-ops typically require high down payments, require a lot of paperwork to approve you, and often do not allow subleasing (or at least not right away or for very long). Sometimes they want to see cash in reserve. They want to know other shareholders will pay their monthly maintenance and not be a nuisance or in any way threaten the well being of the co-op, their investment, or their home. An advantage over condos is that co-ops are often less expensive. They also may enforce noise and carpet rules more than a condo, though not always. It’s a good idea to tip the super and other building staff well on the holidays.
brokelin | 3 years and 10 months ago
I found the rules to be crystal clear, so if you have questions about specific rules, just ask them. Or google them – there’s lots online, too.
brokelin | 3 years and 10 months ago
Also, I came to love doing my laundry in the basement laundry rooms with lots of machines. and an elevator to get my loads there and back (my coop had 1 W/D in the basement, which was fine then – a big improvement after going to the laundromat for years), but that is not as convenient as having more W/Ders and an elevator. So if you don’t have a W/D in your unit (and don’t assume you will be allowed to install one in a unit that doesn’t have one already due to old building plumbing), think about definitely having laundry in the building, and also whether you will want to haul your laundry up stairs. I was younger then and didn’t mind hauling my laundry and groceries up stairs, but since I’ve lived in elevator buildings, I will want to keep having an elevator. And though I only have packages delivered a few times a year, I found having a staffed desk to take them to be really, really useful, as well as to leave keys for my houseguests, or if someone wanted to drop something off for me, and I will want to have a staffed lobby when I buy again.
Another thing to consider is the noise factor. I already knew I preferred top floor units for quiet at night – and in most brownstone or older small buildings, if you aren’t on the top floor, your neighbors WILL wake you up, and frequently – it is really sleep-disruptive. There is absolutely no sound insulation at all in those buildings. In my coop, I learned the hard way exactly where the expression “waiting for the other shoe to drop” comes from – every, single, night, with one fellow coop owner above. Newer buildings can have this problem, too, but old pre-war buildings that are big are often great for sound insulation (again, you gotta ask others in the building), and in many, you don’t even have to be on the top floor – in many of those buildings, you won’t hear a thing, and never be woken from sleep by your neighbors again. That is really worth a lot! It takes discipline to keep looking for only top floor units when looking in smaller buildings (my resolve unfortunately wavered after an illness left me with fatigue for awhile when I was looking to buy).
Though I’ve known many coopers on top floors who had massive rain flooding due to roof leaks, and the board can take many months to fix the roof, whether your building is larger or smaller, and then they all seem have the same issue again every few years – another thing to check carefully in larger buildings (the ones I lived in were fine, but roof access was not allowed in one building, and the other had a professional, well-installed deck on the roof, not the poorly constructed decks that wreak havoc on brownstones and other poorly-run buildings’ roofs.
brokelin | 3 years and 10 months ago
I bought in a small building – 4 units – in a brownstone neighborhood. I was trying to be thrifty, and didn’t see the need to pay higher maintenance to cover an elevator, staff, other things big buildings need, but that I didn’t need. Plus I’d only l rented in small buildings, I didn’t like the idea of long corridors and elevators with people in them whom I didn’t know (a hold over from my college years where many friends were attacked in their rental buildings.)
I had a great unit, low maintenance, and the building had good reserves – financially, a great move. I was a bit suspicious that three of the four units were selling in less than a year. I asked the broker, she said prices were up (they were), and people found it a good time to move on (also true, but…there was more to it than that, I came to believe.) Now my lawyer, after talking to the remaining one for due diligence, told me in no uncertain terms that I should not buy in the building due to the uncooperative nature of that owner, and I didn’t listen. I figured the other new owners would likely be f ine, and majority rules. I learned my lesson – one person can make everybody else miserable (this my lawyer told me from personal experience), and you find they can induce others side with them, even when they don’t agree with them, so as not to get on one person’s bad side and be screwed over by them.
When I moved on due to my job, selling was a nightmare – the one convinced the others to turn down a really well-qualified buyer, out of fear of what that one owner might do to them when they went to sell – they actually told me this. I next rented condos in two large old buildings – and decided if I ever buy again, it will be in a bigger building, that is definitely the way to go. In a large building, condo or coop, you don’t have to spend time making decisions with other nasty and unpleasant board members (a real time and energy suck, even for those of us who were up for doing the work – though even in a small building, some won’t do anything at all, but still throw a wrench into getting necessary building work done.) The large buildings I lived in for some years each were well run, though there were a few owners who had issues with the board (in one, due to another owner’s issue with another owner’s dog, in the other, some owners’ issues with the main desk staff person, who had a nasty side that I didn’t experience until I was moving out already.) Overall, my experiences there were great (my own landlords’ inability to follow laws aside), and I decided when I buy again that’s the kind of building that I will buy in.
Larger buildings can be run quite well, without you doing anything (though you have to check on how they are run when buying, as some larger buildings have larger financial problems – so hire someone who can assess this for you if it isn’t your area of expertise, and maybe even if you think it is.) I’ve had plenty of friends in 8-units in Brooklyn, and they still had issues with running the place with neighbors, some much nastier than mine (though some had overall OK experiences, so you never know…there are all types of humans out there, and you can’t necessarily judge how they will act in a short meeting). 20+ units seems to be the sweet spot based on other friends’ experiences, though my friends on boards in those told of board issues with some problem owners, those owners had no chance of getting onto the board, given the number of owners. But I really liked the 100+ unit buildings I rented in – hallways, elevators and neighbors are no problem in a nice building that is largely owner-occupied and well managed by the board (though one famous name broke an elevator by guests overcrowding it after a party at his place – luckily, there was another elevator.)