Archive for The Board Process


Pet Owners and New York City Apartments

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Pet friendly buildings, no pets allowed and all variations in between face pet owners when looking for a new apartment.  Some pet-friendly co-ops and rental buildings place restrictions on number, size and breed of pet.  What’s a pet owner to do?

Some pet owners will offer large sums of money to cover potential damages to flooring  and lobby carpets.   Some large dog owners will fudge the pet’s weight and breed to gain entrance to a building.  Some co-op boards require interviews and references for the pet (see our article Board Interview for Pets ).  Pet-friendly co-ops and rental buildings have many restrictions on pets.  Many pet-owners are devoted to a certain breed, and choosing a different (smaller) breed is hardly a compromise in their eyes.

During the market slump when many landlords were desperate to fill vacancies, you could move an elephant into your apartment.  Now that the market is tight, landlords are choosier.    Restrictions on pets have become the norm, especially with large dogs and certain breeds like Dobermans and Rottweilers.   In almost all cases approval is required for more than two animals. 

Buildings generally have rules for many reasons.  People are frightened of animals, especially big scary looking pets; there are concerns about property damage; barking disturbs the peace of other residents; jumping and nipping make people uncomfortable; and multiple cats can cause unpleasant odors.   Add to that that there are millions of people with fears, phobias and allergies, and it’s little wonder that pets are becoming even more of an issue.

There are generally exceptions to the rules.  Service dogs for people with disabilities can be allowed with proper documentation.  If the pet owner can provide proof the animal is trained as a service animal and documentation from a licensed medical professional, they might get a waiver. 

 To a pet owner, the pet is part of the family.  Finding a place for them can be frustrating and heartbreaking often causing the owner to pass on an otherwise great place for the humans to live. Nearly half the apartments that would be otherwise acceptable will be taken out of consideration if you have pets.  Patience, persistence and compromise are required when looking for an apartment when apartment hunting with Fluffy or Fido.


Based on New York Times article.

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Sorry says the Board: The Price isn’t Right

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Manhattan buyers and sellers have known for years that the real estate market has its share of challenges.  Co-op boards, who can reject applications for many reasons, are now rejecting sales if they think the price is too low in order to protect the property values in the building.

Buyers undergo intense scrutiny during the co-op application process, including providing volumes of financial and personal history, even references for their pets.  Co-op boards can reject an application for almost any reason, and they are not required to state the reason.

Some boards are determined to maintain the value of the building even if it means rejecting serious buyers.  Sellers want to sell their apartments, and buyers are determined to get a good deal or not overpay for the apartment.   Lawyers are fielding phone calls from boards and purchasers seeking legal advice.

For those outside the New York City area, this is astonishing since co-ops are rare.  But in New York City, where co-ops make up about 75% of the housing stock in Manhattan, this is a way of life.  Brokers are becoming accustomed to brokering deals where the contract price would be acceptable to a board, but the seller gives concessions like splitting the flip tax or paying for renovations as part of the contract.

Sometimes the board will reach out to the broker or individuals involved and let them know what the sticking point before flat out rejecting the application.  However, when a board is unwilling to approve based on low price, they run the risk of being considered a difficult board causing people to shy away from the building; or miss the clues that a seller might be in distress and default on the maintenance charges if unable to sell, putting the building in a tough financial situation.

A good broker will be able to negotiate the ins and outs of a board package, explain the pitfalls and advantages, and advise you on what position you should take.  Manhattan real estate is unlike real estate any other place in the world.  Having a broker by your side who knows their market is an asset to your team.


Inspired by New York Times article


Purchasing a Coop in the Name of a Trust

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 Q:  I represent a purchaser who would like to purchase a cooperative apartment in the name of a trust.  The cooperative board will not allow this.  Why is a cooperative board reluctant to allow a shareholder to own a cooperative apartment in the name of a trust?

A:  Some cooperative boards do not allow their shareholders to own a cooperative apartment in the name of a trust.  This is due to the difficulties that may arise in dealing with a trust as opposed to dealing with an individual.  For instance, a cooperative’s proprietary lease generally places limitations on who can live in an apartment.  When the owner is a trust, a cooperative board will have a difficult time regulating who can live in the apartment since the entity itself cannot physically occupy the apartment.  Furthermore, if maintenance payments are not being made or the cooperative board’s rules are not being followed, it is easier to sue an individual owner rather than a trust.

Notwithstanding the foregoing, many cooperative boards recognize that trusts are an important estate planning vehicle.  As such, some cooperative boards may allow a cooperative apartment to be owned by a trust if the trustee or the occupant: (i) executes an Occupancy Agreement defining who has permission to live in the cooperative apartment; (ii) signs a personal guarantee assuring compliance with the cooperative board’s rules and the payment of maintenance; and (iii) designates an individual for service of process of legal papers on behalf of the trust.

You should always consult with the managing agent or the cooperative board to determine if a cooperative apartment is permitted to be owned by a trust.

Information provided by Neil B. Garfinkel, REBNY Residential Counsel Partner-in-charge of real estate and banking practices at Abrams Garfinkel Margolis Bergson, LLP

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Reading and Understanding a Co-op Financial Statement

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It’s bad enough to keep poor track of your own spending habits. But in the case of a co-op board, which is responsible for the financial well-being of a corporation, it can be catastrophic. Most of the board’s business hinges on financial matters: dealing with shareholder arrears, taking out new mortgages, estimating the cost of needed repair work, and so on. Financial statements are the backbone of the industry. Here’s how to read one.

A co-op’s financial statement consists of several parts: the opinion letter, or auditor’s report; the statements (balance sheet, statement of income and expenses and deficit, and statement of cash flows); and footnotes.

  • Play fair. The auditor’s report, which is usually addressed to the shareholders and/or the board, should affirm that the financial statement presents fairly the financial position of the co-op and the results of its operations and cash flows for a stated period (usually a year). Take note of the concept of “presenting fairly.” It’s not a penny-precise accounting, and it’s not a judgment on the co-op’s financial position. It simply means that the information is accurate and complete enough to be the basis of a well-informed decision.
  • In and out. Your primary interest in reading the financials is the co-op’s cash flow and how it will affect maintenance fees. You’ll find this information in the income and expense statement. Have the co-op’s maintenance charges and other income covered its operating expenses? If the building ran a large deficit, absent extraordinary circumstances, a whopping maintenance increase is on the way. 
  • Looking ahead. The next figures to look at are the mortgages, which are found under “Liabilities” on the balance sheet. The important items to note for each mortgage are the due date and the interest rate. A more remote due date assures a stable line item in the co-op’s expenses, and the interest rate’s relation to current market rates suggests whether a refinancing will bring higher or lower payments. 
  • Taking credit. The existence of a revolving line of credit is also important. It enables the cooperative to cover emergency needs without an assessment, if it so chooses. To some extent it exists as a substitute for reserve funds.
  • Show me the money. After the credit, look to the cash. This can be found at the top of the balance sheet. Find the cash position and any liquid investments. Taken together, will these give the co-op sufficient cash to meet its operating expenses as they come due? If the co-op is “cash poor” and reliant on its shareholders paying on time, the result may be emergency assessments, a general strain on credit and finances, and higher maintenance. 
  • Reserve judgment. Another element of the cash picture is the recurring question: how big a reserve fund should a co-op have? The answer depends on many things, including the age and condition of the building and the types of shareholders living there. An old building needing a lot of repairs, or one with elderly shareholders on fixed incomes, should have more cash on hand to deal with emergencies rather than using assessments.
  • Loose ends. As the final step in your review of the co-op’s financials, you should then look at all remaining items, noting those that you can’t explain or don’t understand, and discuss them with the treasurer. When you finish reviewing the financial statements, you should have a better understanding of your corporation’s finances and be better able to participate in the task of running your co-op.


From Habitat Magazine

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Lawyer’s Guide to Preparing for a Board Interview

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Congratulations, your presence has been requested for an Interview with the Co-op Board of the building where you’ve been dreaming of living since you found the ‘perfect home’.  You’ve been on the roller-coaster ride for what seems like a decade, with contract negotiations, baring your financial soul to all and sundry, and soliciting reference letters to complete the co-op board application.  Now is the big day – the Board Interview.

 Board interviews are near the top of the strangest and most stressful things New York City residents go through while trying to put a roof over their head.  Having enough money to buy the apartment is just not enough; you must pass the interview as well.  Interviews run from basic and routine to a microscopic examination of your life and very grueling.

 While real estate brokers are typically involved in preparing clients for interviews, sometimes lawyers have the perspective to see the mistakes that sink their contract at the last minute in the interview process.  Here are a few tips from one lawyer who has lived through board rejections:

  1. Don’t Lie.  Tempting as it may seem to lie to avoid conflict, it is likely the truth is less damaging than the lie.  Trying to cover up the youthful indiscretion that landed you in jail for the night won’t win you any brownie points with the Board.  Chances are if they’re asking you about your arrest record, they already know the answer and want to see if you’ll fess up.  Explain that you’re not proud of that time and it’s something that you’ve never repeated.
  2. Explain Renovation Plans in the Right Context:  If the apartment is in desperate need of renovation, the board members interviewing   you are aware of the situation and are looking forward to someone bringing that unit up to date to increase market value, and create good comps for the other units.  Present the plans in the correct light:  “You want to update the apartment and have carefully reviewed the alteration policies of the board and plan to follow them to the letter”. 
  3. Be Candid About Your Plans for Using the Apartment:  Some boards are not fond of absentee owners, because they typically tend to have lots of guests and generally don’t spend as much money on upkeep on the apartment as those who make the apartment their primary residence.  If you plan to use the apartment as a secondary residence, be honest about it and address their concerns.
  4. Remember the Pets:  If you have a pet, be honest about it, and stress that yours are obedient and not a trouble-maker.  Explain you have read the rules and understand when and where pets are allowed on elevators and in the lobby.  Reassure them that the animal will not be a danger to anyone in the building.  You may even be asked to bring your pet in for an interview. 

Lastly, be yourself and at ease.  Rely on your Broker to prepare you for the process.   If for some reason the board rejects you, remember the immortal words of Groucho Marks “I don’t care to belong to a club that accepts   people like me!”


Based on article by Jerry M Feeney, Residential Real Estate Lawyer. 

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What Co-op Boards look for in your Financials

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Many co-op boards do a cursory examination of your application:  review financials, check references, interview and make a decision.  But what does it mean ‘review financials’?  In the old days, if the bank gave the ok for financing, that was ‘good enough’; but not anymore.

So what do they look at? 

  • Debt-to-income ratio    
    • Mortgage lenders generally want no more than 28% of a buyer’s gross monthly income to the mortgage payment (Principal, Interest, Taxes and Insurance), or a maximum of 36% for PITI and recurring debt (loans, credit card payments, child support, etc)
    • Co-op Boards usually want to see something closer to 25-30% debt-to-income
  • Income – liquid income
    • Generally the last 3 years of tax returns are reviewed for gross income and adjusted gross income
    • Earning Potential – if your earnings are less than board guidelines, or assets are too weak, but you can show potential for increased income, the board may approve with conditions such as a year’s maintenance held in escrow.
    • Debts
      • Boards also consider other debts, student loans, car loans, other mortgages.
  • Other Factors
    • Location – locations such as Brooklyn or Queens may be less likely to look for large assets and permit more financing than a building on Park Avenue in Manhattan
    • Building size – larger buildings could be easier to buy into than smaller buildings because one or two arrears owners have less impact in a 200 unit building than a 20 unit building.

Boards want to protect their co-op, choosing people who are the right fit.  They also need to stay within the boundaries of discrimination laws.  Reviewing the financials allows the board to decide whether to move forward or not without violating the discrimination laws.

Excerpted from Habitat article

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The Admission Process

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You like the building and apartment, you’ve agreed on the price.  Now it’s up to the board.  Financially and personally, the co-op board approval process is all about whether you are a good fit for the building.  It can seem simple or complex, or simply perplexing.  You want to know what is expected of you, either ahead of time or during the interview.

A few tips to make it through the process:

  • The board can be discriminating  (picky if you will) but not discriminate for reasons of race, color, religion, national origin, sex, age, family make up, disability, sexual orientation or citizenship status.
  • Appropriate information for basing a decision
    • Can you afford to pay maintenance charges
    • How many people will live in the unit
    • Income, credit, residential history and employment history
    • Some boards request a preliminary application which is reviewed by a board screening committee to determine if a purchaser is eligible.  If so they move forward with the full application package.
  • Application package
      • Residential History
      • Bank history
      • Employment History
      • Hobbies and Interests
      • Interest in board or committee service
      • Anyone who will live in the apartment
      • Full financial disclosures.  See our post: What Co-op Boards look for in your Financials.
  • Community Values
    • Assess compatibility with the co-op and its character.
    • Some boards allow opportunity for you to ask your own questions
    • Have pets?  Some boards want to ‘interview’ them as well (Read about it in our article: Co-op Board Interview for Pets!)
    • Each board has their own guidelines
  • After the Interview
    • After review, the committee will give recommendation to the board, who votes on the purchase.
    • Letter sent to seller with decision, with copy to purchaser and co-op’s attorney
    • Co-op’s attorney will communicate with all attorneys involved to arrange closing.

Excerpted from Habitat article

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People tend to find Co-op Board interviews difficult, if not downright stressful.  Some co-op Boards are now requiring applicants to submit their dogs for interviews as well.  Owner/Applicants can also be required to submit letters of recommendation from dog walkers, neighbors and groomers for their pet.

There are a number of trainers who now specialize in preparing dogs who face the scrutiny by New York City co-op boards.  Ms. Renee Payne, owner of Walk This Way , a canine behavior therapist designed an interactive interview process for co-op buildings to evaluate potential canine residents. 

  • Frustration tests to see how easily a dog loses patience and whether or not it acts out if it does not get what they wanted on demand.
  • Separation Anxiety tests to determine if the dog can remain calm when the owner is asked to leave during the interview.
  • An Elevator test to see a dog’s response riding the elevator and strangers getting on and off.
  • Doorbell tests to see how many times the dog will bark when the doorbell is rung. 

Excerpted from New York Times Article by Sarah Kershaw on August 23, 2011.


Manhattan Co-op Board to Madonna: Be Quiet Or Get Out!

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AP photo madonna_150 from MSN articleMadonna’s Upper West Side co-op board  is threatening to evict the Material Girl.  According to a lawsuit filed by her upstairs neighbor Karen George, Madonna is using her Central Park West pied a terre ” as a rehearsal studio, forcing neighbors to endure “blaring music, stomping and shaking walls,” for up to three hours each day.

When a colleague sent me this link reporting the story, I remembered a similar problem that my wife and I  had with an upstairs neighbor (not music- but walking both human and canine). Fortunately, carpeting resolved the problem and our “quiet enjoyment” was restored. If you live in New York City you should expect noise from police cars to fire engine sirens, horns and car alarms, garbage trucks and yes from your neighbors as well.

If you are moving from a quiet suburban neighborhood or if you are particularly sensitive to noise here are some suggestions to test your decibel tolerance before you buy an apartment in Manhattan.

  • If the apartment is located near an elevator, public laundry room or trash room make sure mechanical noises can’t be  heard.
  • Check to see if the windows have been upgraded to reduce street noises  as well as  energy costs.
  • Depending on the floor of the apartment, you may want to listen carefully- especially in rear courtyard facing rooms-for fans and other mechanical noise creating devices on adjacent rooftops.
  • Ask the seller’s/showing broker to turn off or lower any music playing in the apartment.
  • Before signing the contract, visit the apartment at different times of the day. A morning visit will expose the going to work noises,  an afternoon visit will let you concentrate on street and traffic sounds and the evening visit may give you some insight into the level of noise you can expect from prospective neighbors  are reading or blaring their music or TVs?
  • As part of your due diligence, you and/or your attorney should read the  co-op or condo meeting minutes and see if there are any noise issues discussed.

Generally speaking, a co-op board will have more jurisdiction and clout over noise matters. Based on their bylaws a co-op board may be able to levy fines until the offending shareholder complies or, as with Madonna,  threaten and ultimately have the shareholder evicted. Condos generally do not have this power and,  it may be completely up to you to bring any legal pressure on your fellow condo neighbor.

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