At the moment there are a lot of good offers, including luxurious condos in prestigious areas in New York at discounted prices for both personal use and investments.
Condos, though, represent only 15% of all buildings with the apartments on sale.
Historically, real estate owners used to transform their buildings into Cooperatives, selling minority shares and, by doing so, ensuring an immediate income while maintaining control of their assets. Consequently, most of the pre-war buildings (85%), especially in high sought after areas such as 5th Avenue, Park Avenue, Central Park West are Cooperatives. The Cooperatives usually offer more spacious accommodations at more attractive prices than Condos,
In spite of this, LaSeven, Inc. advises to avoid buying Cooperatives because of the onerous disclosure requirements of personal assets to be accepted as a buyer from the Cooperative Board, and of the discretionary control of the Cooperative Board over all matters pertaining to the building and he subject apartment, including granting the approval of selling, renting and performing renovations to the premises.
Condos / Cooperatives
There are two ways of buying an apartment in New York City: buying a unit in a Condominium or buying minority shares in a Cooperative. Those are two different entities, the differences of which are listed below.
A Condominium is a type of property where one can purchase a single unit in a complex of multi units. The buyer, then, owns the actual individual apartments, including its walls all inside them, as well as a proportionate share of common elements of the building. Each Condo owner pays a monthly fee, their share of all the expenses of the building. Ordinary administration decisions are made at Condo Board meetings and thereafter they are executed by the management company hired by the Condominium Board. Mortgages are placed by the individual owners, in their discretions over the single apartments, and real estate taxes are billed on each individual apartment. The Board discretions is limited to their right of First refusal on the sale or rental of an apartment: in the event the Board exercises it, it means that the Board has to match the terms and prices offered by a third party.
An apartment in a Cooperative represents a very different form of ownership. The Cooperative is a company that owns the entire building including the purchased apartment. Purchasers acquire not a piece of real estate but a minority stake (shares) in the company that owns the building, similarly to the shares purchased on the stock market. The minority share holders receive a lease contract allowing the exclusive use of the apartment they purchased, rarely giving the exact size of the apartment. The maintenance of the building and all decisions pertaining to all the apartments are determined by the Coop Board in their sole discretion, and are not bind to fairness or to explain reasons that brought to the denial of application to sell, rent or to perform renovations in the apartment.
One or two mortgages are often placed on the entire building, and the monthly maintenance fee is inclusive of interest payments for the main mortgage(s) and of real estate taxes. Maintenance fees are usually higher in a cooperative then a condo, and could be subject to sudden increases or assessments.
However, before buying an apartment in a Cooperative, it is important to verify the procedure the buyer will have to undergo: the Board members are to decide on selling, renovating and, if necessary, reselling. The investors have to be aware of the fact that they will have to reveal their income, tax declaration and assets to get the approval from the Board. The Board can as well refuse to sell the shares without explaining the reason. It is important to consider this point if the investor decides to sell his shares in the future.
LaSeven, Inc. prefers to advise clients to purchase apartments in Condos, rather than in Cooperatives, in order to circumvent the control issues associated with Cooperatives.