Co-ops
- Thread starter aceofclubs26
- Start date
A lot of it is historical. Condominimums (as a form of ownership) didn't show up until the 1970's. But Coops were around for about 70 years before that. Many of the original Coops were buildings where half the residents were the owners, and the other half tenants. But MANY Coops failed in the depression, and there are several buildings which were Coops, went belly up,and sometime later got converted back to Coops.
Anyway, before 1990, it was VERY hard to find any choice in Condominium ownership, and thus people were forced to buy Coops (and about 90% of the market was Coops). So, since people had no choice, and were "used to" buying Coops, it's not a problem. But in areas where people expect to see Condominimums, it's very hard to convince them to buy into an "inferior" form of ownership.
Anyway, before 1990, it was VERY hard to find any choice in Condominium ownership, and thus people were forced to buy Coops (and about 90% of the market was Coops). So, since people had no choice, and were "used to" buying Coops, it's not a problem. But in areas where people expect to see Condominimums, it's very hard to convince them to buy into an "inferior" form of ownership.
I don't think thats the only reason and not as simply put. I could understand how historically co-ops have been around longer. And also the point how in NYC, many did not have much of a choice due to the abundance of co-ops. But, I also have to think it's the way they are managed. It seems the co-ops in NJ are not as financially sound as the ones in New York. Is this because of them being more "experienced" with that sort of ownership as Slinky mentioned? The slightest repair causes a major assessment in a NJ co-op where in NYC, the reserve fund will typically take care of it. A lot of the buildings I've seen also have a much higher monthly maintenance in comparison to similar co-op units in New York City. I guess my real question is why NJ co-ops haven't learned how to manage their buildings as well as their counterparts? If they were a little more financially sound, I think they would be commanding much higher prices.
I also think that the real estate tax laws are different. With a Condo you can typically take all the deductions like a regular house. I don't believe that's trure with a co op. With a condo you own the unit. With a co op you own a % of shares of the whole building. Also generally I believe a co op has to vote a new owner into the building, so if you find a qualified buyer when you want to sell, the rest of the owners my not vote them in.
Nope, not all true: tax deductions are pretty much the same for Coops and Condo's, except if the Coop violates certain IRS rules like the "80/20 rule". Also, a lot of Condos are developing complex sets of rules which makes them more and more like Coops (quite ironic, actually, but it's because people who buy very expensive apartments actually want "restrictions", no matter how much they complain about Coops being restrictive).
Getting back to Coops in NJ: from my experience, the Coops in NJ are "lesser" buildings than the condos: the condos are glitzier, high-rise buildings with lots of amenties, and teh Coops are dumpy 1950's and 1960's buildings which were never "top notch" even the day they were built. So, they start off not being too desirable, and then you tell the buyer "it's a Coop", and it gets even tougher. For example, I know when I looked at stuff in Teaneck, the Coops were all in dumpy buildings.
But again, it's mainly what people are used to: look in parts of Brooklyn and Queens which are "equivalent" (economically, demographically, etc.) to Fort Lee, and Coops still sell fine.
One other issue: who is doing the buying? I don't know about today, because I haven't venture into the Fort Lee market recently, but when I was in that market: you had a large percentage of Asians - Koreans in particular - seeking to buy the Condos there. At the same time, when that sme group was seeking to buy in Manhattan, they would only look at Condos there as well. So, if they make up a small percentage of the marlket looking in Manhattan and they will only look at Condos, it doesn't affect teh market all that much. But if they are a major force in the market somewhere else (like Fort Lee), that could have a major impact in the smaller market.
When teh market crapped out last time, it because almost impossible to sell Coop in Forrest Hills unless they were in "top buildings". One reason was that the few peple who were still in the market to buy, only wanted houses, not apatements and certainly not Coops. the biggest single thing which moved the Coop market back up in the "lesser" areas in Brooklyn and Queens (i.e. not Brooklyn Hieghts, Park Slope, etc) is that people who wanted to buy (especailly first tiem buyers) could no longer afford even the bottom of the line houses, and still wanted to buy, so Coops were the only choice.
Getting back to Coops in NJ: from my experience, the Coops in NJ are "lesser" buildings than the condos: the condos are glitzier, high-rise buildings with lots of amenties, and teh Coops are dumpy 1950's and 1960's buildings which were never "top notch" even the day they were built. So, they start off not being too desirable, and then you tell the buyer "it's a Coop", and it gets even tougher. For example, I know when I looked at stuff in Teaneck, the Coops were all in dumpy buildings.
But again, it's mainly what people are used to: look in parts of Brooklyn and Queens which are "equivalent" (economically, demographically, etc.) to Fort Lee, and Coops still sell fine.
One other issue: who is doing the buying? I don't know about today, because I haven't venture into the Fort Lee market recently, but when I was in that market: you had a large percentage of Asians - Koreans in particular - seeking to buy the Condos there. At the same time, when that sme group was seeking to buy in Manhattan, they would only look at Condos there as well. So, if they make up a small percentage of the marlket looking in Manhattan and they will only look at Condos, it doesn't affect teh market all that much. But if they are a major force in the market somewhere else (like Fort Lee), that could have a major impact in the smaller market.
When teh market crapped out last time, it because almost impossible to sell Coop in Forrest Hills unless they were in "top buildings". One reason was that the few peple who were still in the market to buy, only wanted houses, not apatements and certainly not Coops. the biggest single thing which moved the Coop market back up in the "lesser" areas in Brooklyn and Queens (i.e. not Brooklyn Hieghts, Park Slope, etc) is that people who wanted to buy (especailly first tiem buyers) could no longer afford even the bottom of the line houses, and still wanted to buy, so Coops were the only choice.
Is the portion of your monthly maintenance that represents the interest you pay on the building's mortgage a tax deduction?
The other thing I neglected to notice in Boywonder's post is that you don't necessarily have to be voted in. If the sponsor still owns more than 50% of the units in the building, you most likely won't need to go before a board if you're buying a unit from the sponsor. However, it may be a little tougher to obtain a decent mortgage since most lenders don't like to see a coop with a single entity owning such a high percentage of units.
The other thing I neglected to notice in Boywonder's post is that you don't necessarily have to be voted in. If the sponsor still owns more than 50% of the units in the building, you most likely won't need to go before a board if you're buying a unit from the sponsor. However, it may be a little tougher to obtain a decent mortgage since most lenders don't like to see a coop with a single entity owning such a high percentage of units.
that portion of your monthly maintenance that represents your share of the mortgage interest on the co-op's underlying mortgage and real estate taxes paid by the co-op is deductible. every year you get a letter telling you how much of your maintenace on a per share basis is attributable to these two components and that's what you can deduct.
actually the number of shares the sponsor owns doesn't dictate whether booard approval is necessary. any purchaser of a Sponsor apartment doesn't require board approval. the %age of Sponsor ownership dictates whether the sponsor can control the board of directors - but in no event longer than 5 years.
actually the number of shares the sponsor owns doesn't dictate whether booard approval is necessary. any purchaser of a Sponsor apartment doesn't require board approval. the %age of Sponsor ownership dictates whether the sponsor can control the board of directors - but in no event longer than 5 years.
The portion of the monthly maintenance which is tax deductible is both the interest on the underlying mortagage plus the RE taxes.
Whether you need board approval on a given unit is dictated by what is in the Offering Plan. Generally speaking, it's that 'all "unsold shares" don't need board approval, and generally speaking, that's all units which have never been owner occupied since the building went Coop. Now, that usually means Sponsor units, but if the Sponsor sells a unit to someone and designates it as a "sale of sunsold shares", they retin the rights of the Sponsor so long as they or a family member never occupy the unit. But there are lots of counter examples: there are a number of buildings where the first sale after the Sponsor sale also has no Board Approval (typical in Rockrose conversions), and there are buildings where even Sponsor/Unsold shares need Managing Agent or Board Approval.
As far as control of the Board of Directors, again, it's whatever is in teh Offering Plan, but in most cases the Attorney General requires sponsors to promise that they will give up their control of the Board of Directors after they sell over fifty percent of the shares, or after five years have passed since the closing, whichever comes first.
Whether you need board approval on a given unit is dictated by what is in the Offering Plan. Generally speaking, it's that 'all "unsold shares" don't need board approval, and generally speaking, that's all units which have never been owner occupied since the building went Coop. Now, that usually means Sponsor units, but if the Sponsor sells a unit to someone and designates it as a "sale of sunsold shares", they retin the rights of the Sponsor so long as they or a family member never occupy the unit. But there are lots of counter examples: there are a number of buildings where the first sale after the Sponsor sale also has no Board Approval (typical in Rockrose conversions), and there are buildings where even Sponsor/Unsold shares need Managing Agent or Board Approval.
As far as control of the Board of Directors, again, it's whatever is in teh Offering Plan, but in most cases the Attorney General requires sponsors to promise that they will give up their control of the Board of Directors after they sell over fifty percent of the shares, or after five years have passed since the closing, whichever comes first.
The reason that all the new apartment and loft buildings in New York City (and I imagine in most other cities) are now condominiums and not co-ops, is due to the co=op boards. All too many of them are run by power-hungry little dictators who are very picky about just who gets to like in their precious buildings. It’s not uncommon for co-op apartments to go unsold for years.
Developers and landlords simply don’t want to put up with this crap any more.
Developers and landlords simply don’t want to put up with this crap any more.
The other advantage of coops, that hasn't been mentioned, is that they tend to be owner-occupied, since the boards usually restrict rentals, while codos tend to attract a fair amount of investment property deals, hence more rental tenants. The theory is that buildings with owner-occupied units tend to be better managed and better run over the long term than buildings with a more transient population. Of course, that's not true in every case, but I believe there is some truth to the theory.
There are no new coops in NY anymore, notwithstanding the fact that there are distinct advantages to that form of ownership. Prior to 1989 coops were very popular in NYC because they were not subject to transfer tax which back then was about 2% of the price and now can be as high as 3% depending on the facts. After what is known as the Pan Am Statute (the case had to do with the Pan Am Building and a transfer of corporate shares) coop stock transfers became taxable like any other real estate transaction. Since the sponsors no longer saved money by setting up their buildings as coops, they universally changed the state of the art to condos. Investors like condos much better because you can sell or rent a condo without Board of Directors imposed limitations and fees. So, no new coops since the early 90s.
The advantage of a coop is it makes for a great place to live. No transient renters. No investors. Most units are owner occupied. In short, you say hello to the same people in the elevator for years. Also, older condos in need of building wide capital improvements ie a roof or boiler or brick work have a hard time financing because there is no asset that is commonly owned unlike a coop which can mortgage the building to create cash required for capital improvements.
And Slinky is correct. Tax treatment for coop and condo unit owners are substantially the same. I may not know much about pussy, but of this I am quite sure.
The advantage of a coop is it makes for a great place to live. No transient renters. No investors. Most units are owner occupied. In short, you say hello to the same people in the elevator for years. Also, older condos in need of building wide capital improvements ie a roof or boiler or brick work have a hard time financing because there is no asset that is commonly owned unlike a coop which can mortgage the building to create cash required for capital improvements.
And Slinky is correct. Tax treatment for coop and condo unit owners are substantially the same. I may not know much about pussy, but of this I am quite sure.