Guide to buying property in New York City

A Condominium apartment in Manhattan is real property. The buyer gets a deed just as if he were buying a house. There is a separate tax lot for each apartment, which means the buyer pays his own real estate taxes for the property, and will also pay common charges on a monthly basis. Common charges are similar to maintenance in a cooperative, however, they will not include real estate taxes since these are paid separately, nor will they include the building’s mortgage and interest given that a condominium, by law, cannot have an underlying mortgage. Condominiums are attractive for a variety of reasons:

1. Financing the purchase of a condominium apartment is governed by the financial markets not a board of directors and thereby much more flexible. A buyer can finance up to 90% of the purchase price.
2. An approval process is usually required, and most condo boards are requiring application packages with financial disclosure. Generally, however, the requirements are not as strict as the co-op board building, but it is usually not as long as a co-op approval process.
3. There is greater flexibility in sub-leasing your apartment. This makes condominium the better choice for investment property.
4. They are the ideal option for non-U.S. citizen given that co-ops are unlikely to approve a buyer whose funds are not in the U.S.

Because there are fewer condominiums than cooperatives and that they are “easier” to purchase, they are generally more expensive.

In New York City, approximately 80% of our apartments available for purchase are in cooperative buildings, while 20% are in condominiums. This means:

1. There are more inventories to choose from if the buyer includes co-ops into the mix of properties.
2. Prices are, in general, more attractive for cooperatives – (supply and demand).

Cooperatives are owned by an apartment corporation. Individual tenants do not actually “own” their apartments as they would in the case of “real” property. Owners, (shareholders) of co-op apartments, actually own “shares” in the corporation, which entitles them to a long-term “proprietary lease.” The corporation pays the total amount of the building’s mortgage, (a cooperative may have an underlying mortgage for the entire building, whereas a condominium building must be owned outright), real estate taxes, employee salaries, and other expenses as determined by the number of shares the tenant owns in the corporation. Shares amounts are dictated by apartment size and floor level.

Please note: when buying a cooperative

1. The Board of Directors has the right to “approve” or “reject” any potential owner. The board elected by all of the tenant-owners of the co-op, interviews all prospective owners. It has the responsibility of protecting the interest of all tenant-owners by selecting well-qualified candidates.
2. Services and security of the building are kept at high standards.
3. Portion of the monthly maintenance are tax deductible. Shareholders can deduct their portion of the building’s real estate taxes and their proportionate share of the interest on the building’s mortgage.
4. The amount of money that may be financed is determined by each cooperative. Some buildings require prepared to “put down” at least 20 to 50% of the purchase price (depending on the building) when purchasing a cooperative apartment.
5. Subleasing a co-op must be approved by the Board of Directors of the cooperative. Each corporation has its own rules, and they should be examined if a potential owner intends to sublet.

It is important to remember that co-ops are the norm in Manhattan and before beginning a search think about the financing limitations, application and the interview process.