CO-OP/CONDO BUYERS

In an unusual survey, BrickUnderground interviewed New Yorkers on their neighborly pet peeves. The question for these sleep talkers was whether they preferred the annoyance of loud neighbors or smelly ones (keeping in mind that smell can mean anything from cooking smells to smoking and beyond). One Sugar Hill respondent preferred smell to noise, which was called “stressful, especially if it’s fighting or a dog or something and it never stops.” Mack in Jackson Heights chose noise, because, “whatever it is, I can handle them. If it’s too loud for me, I’ll go over there and tell them, and if they continue, I have no problem elevating my complaint.” But the final word comes from Vinnie, who is willing to put up with smells for the cash: “My roommate has B.O. and I hate it. But he pays his rent on time.” Way to go, Vinnie!

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Bamboozling transfer agents: six attempts. This year, I have seen a record number of attempts to bamboozle transfer agents. Attempt number 1: a shareholder whom we’ll call Amy (all names here have been changed) produced a power of attorney allowing her to transfer an apartment from boyfriend Bob to Amy, without disclosing that Bob was dead and had living relatives/beneficiaries. Attempt number 2: Cindy, the executor of her mother’s estate, sought to transfer the lease and shares to a trust to permit Cindy to live in the apartment without disclosing that her sister, Daisy, had equal rights to inherit the apartment but would receive no benefit from the apartment while Cindy lived there. Attempt number 3: Ed, the beneficiary of decedent Fred, sought to sell an apartment without revealing that the federal government had filed tax liens against Fred in Florida, where Fred had lived in the last years of his life. Attempt number 4: Helen wanted her ex-husband, Ira, removed as a co-owner of their co-op. George, Helen’s lawyer (and also her father), claimed that Ira had consented to the transfer of the apartment to Helen but was not willing to sign any documents. Attempt number 5: Karen wanted the apartment transferred to herself without any documentation from her ex-husband, Larry, because, according to Karen’s attorney, photocopies of 40 pages of court documents “clearly” showed that Karen would be entitled to the apartment. Attempt number 6: Linda, the court-appointed guardian for her mother Mary, sought to transfer Mary’s apartment to Linda to reduce Mary’s assets to qualify for Medicaid, even though the powers granted to Linda under the guardianship were limited to providing for support of Mary, and contained no legal authority to dispose of Mary’s assets.

Takeaway

If any of these transfers had been carried out as requested, the co-op could have been subject to thousands of dollars of valid claims from other parties. Each of these cases involved buildings I represent and none of the transfers were done as requested because I have successfully trained managing agents to recognize that any transfer involving a decedent’s estate, trust, power of attorney, divorce, partnership, corporation, LLC, or other entity form of ownership, or in any other way “unusual” must be handled in conjunction with me as the building’s attorney. I have established a complete set of requirements for each of the described types of transfers: executors must have explicit probate court authorization to sell; federal and state waivers of estate tax liens must be produced, and legal opinions must be rendered by counsel for estates, trusts, LLCs, and other entities. All affected parties not present at closing must be adequately represented by counsel and all documents must be reviewed by me. The cost of the review and the transfer agent’s usual fees are paid by the party involved. Result: the co-op is protected against possible scams.

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From the not-so-recent-trends department: the hot thing in 1880s New York was putting food – vegetables, meat, etc. – into cold storage. In what is now known as the Tribeca neighborhood, technology had advanced to the point where special-purpose refrigeration or “cold storage” facilities were popping up everywhere to aid nearby dairy and produce businesses in preserving their perishable goods. One of these buildings was a warehouse built at 28 North Moore Street in Tribeca. Well, yesterday’s trend has morphed from cold storage to posh living, as a place to store your milk and vegetables is now a place to eat your milk and vegetables. A story by New York YIMBY reports that the rundown, seven-story, former cold storage warehouse at 28 North Moore between Hudson and Varick Streets, is in the early stages of transformation from old commercial space to spanking new condo. It incorporates typical luxury elements – the  3,100-square-foot, full-floor units have access to storage, a recreation room, a gym, and a shared roof deck – with a classic red brick façade. There are only seven owners moving in, but you can bet they’ll bring up the already impressive property values. And they’ll probably store their perishables in a Kenmore.

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What’s a good way to predict that your modest co-op apartment may go up in price? Answer: when your neighborhood, previously nameless, has been christened with a new trendy name by developers who believe a branded neighborhood will (hopefully) be the next hot neighborhood.
With that in mind, Bronx residents may want to put their brokers on standby. That is, if recent reports are credible. According to The Real Deal, developer Keith Rubenstein’s Somerset Properties and the Chetrit Group plan to build up to six 25-story apartment towers on Third and Lincoln Avenues in the Bronx. The area once contained as many 60 piano factories, so the developers have erected a billboard calling the neighborhood – what else? – “The Piano District.” How many piano factories remain? Who knows? Who cares? They were there once, and that’s what counts. Or as Rubenstein puts it: “I’m not just calling it a made-up name for no reason whatsoever.”

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Everyone likes watching fish, right? They can be elegant and exotic, and quite beautiful too. The Real Deal reports that custom-made aquariums are turning up more and more as fixtures in the homes of the well-to-do in South Florida. While we haven’t heard of any such sightings in New York, the story gave us an idea. Why not add an aquarium to your lobby? In the fight for curb appeal, it could certainly make your building stand out from the pack. The prices range from about $5,000 for a 10-gallon tank to $1 million and more for a tank holding 5,000 gallons of water. And you can get even more elaborate in your lobby redesign. For $40,000, London-based Aquarium Architecture will sell you a 1,057-gallon garden equipped with LED lighting that actually simulates sunrise and sunset, which is said to decrease stress for certain types of fish. No report on what it does to humans or resale value.

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Like death and taxes, capital improvements are an inevitable part of a co-op or condo board's life. They may not happen during your term, but at some point, some part of your building is going to need to be replaced or upgraded. Bidding systems for contractors or other professionals are fine, but who vets the products and systems they use?

In Skyline Restoration's fall 2015 issue of their quarterly newsletter, Adam McManus of Sullivan Engineering explains why a board should be open to installing mock-ups before going through with a large project: "Static product comparison mock-ups are often installed to compare and choose the most aesthetically pleasing match to a building facade feature. Other product comparison mock-ups are installed to test their functionality ... A project plan should always factor in periods of time to test products in place and monitor their performance through weathering and traffic use." No one likes adding steps to capital improvements, but when you can see for yourself how a product will last, it's worth looking into.

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We have been working with the boards and owners of several co-op and condo buildings about selling apartments at a premium to a developer. The developer is interested in either demolishing the buildings and constructing new ones with more amenities so he can sell condominiums at current higher prices or doing gut renovations of the buildings and selling new apartments. In some instances, an investor wants to own the ground floor retail space, but does not want to deal with the co-op structure. In other situations, retail space may not be permitted in a building because of zoning laws. Negotiating the price becomes the easy part; the more difficult aspects are the tax consequences and the manner in which the funds will be divided among the owners. Co-op and condo documents usually require funds to be divided by the number of shares or percentage interest that each owner has — although that may not (and frequently does not) reflect the fair-market value of the apartments.

Takeaway

Such deals require a certain degree of finesse to address the tax and allocations issues. But there is also the matter of greed among some residents. We have seen situations where owners who are getting more than the value of their apartments say that, because they just bought a new refrigerator, they want a premium over other similar apartments. And, of course, there are residents who think that if they say no, they can make a better deal. Sometimes they can, but usually, they make the deal unaffordable for the purchaser so it falls through. Fortunately, there are ways to deal with unique issues that result in a win-win for both the shareholders/unit-owners and the purchaser.

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When you consider the amount of money that people stand to make by renting out a room in their apartments, you can understand why so many co-op and condo boards have to handle shareholders and unit-owners who want to get in on some Airbnb action. Many of them may ask, "Hey — if my building allows sublets, I can sublet for short stays, can't I? And since the law allows roommates, why can't I rent out my spare bedroom by the day, week, or year?"

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It doesn’t take an Einstein (or even a Donald Trump) to point out that Brooklyn is hot. With never-ending reports on the newest residential towers filling the real estate pages, property values are continuing their meteoric rise.

That trend has been further confirmed by recent filings at the Department of Buildings. This past October, most of the “Build We Must” crowd focused their activity on smallish projects outside of Manhattan. In Brooklyn, of course.

And yet, there is an inevitable cooling trend even in the hottest of hot spots. According to The Real Deal, “Far fewer high-rise plans have been submitted this year [for Brooklyn] compared to the same period last year. Residential project plans including at least 200 units are also down citywide.” Better figure out the next "up and coming" nabe before the hipsters do!

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You'd be forgiven if you thought that the seemingly endless growth of newer and shinier residential towers around Manhattan meant that there were more units available for purchase. You'd be forgiven, but you'd still be wrong. Curbed reports that a new report from Crain's shows that less than one percent of apartments available in Manhattan are actually for sale. On top of that, three-quarters of the 850,000 units are rentals, making finding a permanent living situation even more difficult.

The Crain's report goes into more detail about the expense involved in building in Manhattan and how that trickles down to buyers (and tries to justify the headline-grabbing, record-breaking prices that keep popping up). The short version? If you want to own, start looking into a Queens commute.

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