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Thank you Steven, that is insightful. Is it just me or doesn't it seem like a co-op is just a scam/ponzi scheme?
If this is typical for a co-op...what happens in the long term if they just keep borrowing more money? Like what about it in 30-50 years? How is this sustainable?
Thank you for the insight. Another good article would also be about co-ops who have paid off their mortgages - if this exists?
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visit habitat uHabitat U: learn about how to manage a building, and what you should know as a co-op or condo board member.
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Search, by word or phrase, all magazine articles from January 2002 to present. You may print or email your results. Print subscribers receive free access to the Habitat Article Archive.
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learn moreLearn all the basics of NYC co-op and condo management, with straight talk from heavy hitters in the field of co-op or condo apartments
Professionals in some of the key fields of co-op and condo board governance and building management answer common questions in their areas of expertise
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This is a very good question, and I honestly don't know the answer. I don't think anyone thought that far ahead when the majority of co-ops were formed in the early 1980's.
Another looming issue facing co-op boards is the expiration of the Proprietary Lease. Check the first or second page of your PL. There should be a hard expiration date, which was required when the PLs were first approved.
If the expiration date is less than 30 years from today, new purchasers will find it increasingly more difficult to obtain 30 year mortgages. Why, because when the PL expires, the Co-op corporation will cease to exist and the shares in the corporation (i.e. the mortgage collateral) will have zero value. Banks are reluctant to underwrite mortgages where the collateral can be worthless. ;-)
For boards that haven't done so already, you should have a discussion with your board attorney to find out what they recommend. There are a number of ways to avoid this which is why your attorney needs to be consulted.
I wish Habitat would do an article on this so more co-ops aren't caught unaware.
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