It depends on how your building handles giving back the abatement funds. Our building just passes through to the shareholder the abatement amount the city shows in their detail listing. If an apartment is held in a trust, the abatement amount will be reduced and eventually end. The building will not get the abatement and since we simply pass it onto the shareholder, the shareholder is the only one who looses. We don't have too many apartments held in a trust and we expect some of them to revert back to individual ownership.

I am not a Lawyer. But I have had to deal with this issue a few times. There are two main types of Trusts: Real Estate Investment Trusts REIT) and Revocable Trusts. If your Coop does not allow subletting this is a problem as the Trust becomes the shareholder and the Occupants are technically sub-lessees. So you have just opened that door. The shares pass directly to the beneficiaries and bypass the Board's approval of the next generation of sub-lessee unless there is a sale. Your relationship is with the Executor or Directors of the Trust who act on behalf of the Trust who is the holder of shares. Your Sub-lessee has usually put all their assets into the trust so there are liquidity issues and tax issues. Your Coop Lawyer will have to cut about 5-6 different documents, depending on the exact wording of the trust, to get around it's provisions in order to protect the Coop and not undermine any P-Lease or bylaw provisions, which can be contested. If you live in a building with very wealthy shareholders, it might be necessary to explore or deal with. A REIT has very different maturation and pass-through provisions than an RT. We have turned them down due to the subletting issues.

dsi1 - I do not want to sound impertinent, but REITS and Revocable Trusts are two entirely different animals. REITS are investment vehicles generally available to the public and are intended to aggregate investors for the purpose of purchasing entire buildings, communities, and other real property assets. I do not believe they get involved with individual unit ownership. Revocable Trusts, on the other hand, are used by individual unit owners for estate, tax, and asset protection purposes. They are limited to the grantors and beneficiaries of the trust instrument.

Have you ever had to deal with a REIT in relation to individual co-op unit ownership? The REITs I am familiar with own shopping malls, retirement communities, amusement parks, etc.

Hi Steve,
As I previously mentioned, but perhaps I was not clear enough, they are very different. I did once receive an exploratory on a REIT by a family group wanting to make an investment trust. It neither made particular sense to me, nor did the maturation characteristics and mechanisms make sense. My bottom line always is - if it is in the best interest of the Coop first, and no one so far, has been able to make a reasonable case as to the Coop benefit over the individual shareholder's desires. No-one really wants to discuss risk, and that is an issue and potential major legal expense that might not turn up for 10-30 years. One problem I have run into is that the Lawyers who create some of these trust vehicles get very creative but know little or nothing about Coop Law, proprietary leases and bylaws and therefore create Trust provisions that run rampant over it all. Compounding this is the additional problem that many of these custom devised Trust provisions are untested in the Courts, having no prior precedence in law established as a guideline for us, or the Courts to go by, and in the event of it being contested have then just made the Coop an unwilling partner at our own expense. I hardly see how that is in the best interest of the Coop.
You still have to get back to the purpose of the Trust being to shelter money/assets so the Trust becomes the shareholder, the would-be shareholder is now a sub-lessee with technically a very different legal relationship profile to the Coop, the issue of sub-leasing, and liquidity issues due to dumping everything into the trust. If our Lawyers have to create all sorts of documents to get around the trust provisions, and hope they hold up in Court if/when there is a challenge, then I think we are walking down the wrong road when it comes to fiduciary responsibility to the Coop. Relatively few units sell into a Trust situation outside of the big money Coops, so find a purchaser that isn't wanting one. Until they become a shareholder, the potential purchaser is technically owed nothing by the Coop, either. I want to deal directly, legally with the shareholder of record being the neighbor, and not the Director of the Trust, or it's Board, which often are not resident but can only cost the Board more time and legal expense.
Dealing with Estates can be difficult enough, especially if they are going to go through probate in a foreign country. (had one of those too!), If there is no mortgage then your only leverage is what? Breach and 'notice to cure' and foreclosure? That's a last case scenario. So, I am obviously not a fan of trusts and Coops, Condo's are very different. Not everyone's personal script, even if financially qualified, is conducive to Coop purchasing, I believe that some are better off with a Condo structure as a better fit for their financial or personal needs.
All that being said, with the rising value of RE in NYC, more and more units will cross the threshold into mega-value land, and somehow trust provision guidelines and Coop Law, leases, and bylaws will need to get better aligned. I suspect that will be on a slow case-by-case basis in the Courts, unless the Bar Association sub-committee gets busy. But, as I stated previously, I am not a Lawyer, just a Board member of a great small Coop.

Hi dsi - Broad stroke I agree with your position about trusts and LLC's. They create extra layers of confusion and effort on the part of boards who are asked to approve unit ownership by a non-person entity. We have a question on our purchase application about shares being held by other than actual people, and we may request copies of the trust and other enabling documents if we have any questions or concerns.

I spoke to a Trust and Estate attorney I know. She said that when her clients approach a board about transferring shares from personal ownership to a trust, some boards will approve the transfer provided there is a stipulation agreement about who will live in the apartment, who will be responsible (guarantee) for maintenance and assessments in the event of arrears, etc. The cost of drawing up the stipulation is borne by the shareholder, and the co-op is reimbursed attorney and other fees for revisions and reviews by the board attorney. So in actually there is not that much extra effort required on the part of board members. As a hedge against arrears and the eventual foreclosure scenario you described, the board can ask for a year or two or three of maintenance be put into escrow. Then there would be actual skin in the game, even without a mortgage.

In addition, If a trust terminates when the shareholder dies (and most that are set up to own co-op shares do terminate at that time), the provisions of the trust do not trump the prerogatives of the board in approving succession shareholders. There still needs to be the formal approval process, and the board still has the right to reject the proposed new shareholders for any of the usual grounds.

In today's litigious environment, co-op shares are placed in trusts for very legitimate reasons. A board needs to be very careful and very thorough in their review of such entity ownership before approving it, but I these things should be evaluated on a case-by-case basis and not rejected out-of-hand. The balance is tough, though, and often goes unappreciated.

I agree generally with your assessment, however a few point should be made. If the Coop has a 'no sublet' in it's bylaws then you are in breach. Not all trusts dissolve upon the death of the shareholder, in fact many don't. This scares me: "we may request copies of the trust and other enabling documents if we have any questions or concerns" - as pretty much all trusts are custom instruments they all need to be reviewed by a knowledgeable Coop Attorney and not a Trust Attorney, as they know little about NY RE Coop Law. You still haven't dealt with the cash and liquidity issues that are required of all other shareholders, and getting around the Trust control of the shares. The provisions of the trust have to be written to 'not trump' the prerogatives of the Coop or you are in a litigious situation. In the end result you also have to ensure that you are maintaining a truly level playing field for all shareholders and not creating a special class of shareholders with special privileges. Many of these trusts include the real estate as opposed to being solely of the RE shares. Any newly 'creative' engineering by the Trust Attorney that hasn't already been vetted by the Court System thru due process is a potential problem for the Coop. Being covered for that legal expense, as opposed to all the legal that enabled the scenario is a separate legal expense issue as well. We have seen some remarkably creative and inventive, unproven trust provisions that upon the advice of Counsel would have a very hard time getting thru the Court system. In the end result, how does this benefit the Coop or the Board who volunteer their time?

Hi dsi - I gave the transcript of our discussion so far to my T&E attorney because we were going beyond my level of expertise. Here are her comments:

First, as to dsi1's comments, in my experience, the two most common types of trusts that seek co-op ownership are Qualified Personal Residence Trusts ("QPRTs") and revocable trusts, with Credit Shelter Trusts, as I will call them, a close second. Perhaps dsi1 meant to refer to a QPRT rather than a REIT? Second, as to your comments, revocable trusts are not particularly useful as to tax or asset protection issues. Revocable trusts are used most often by New Yorkers who 1) believe that avoiding probate will protect their privacy, or 2) anticipate a complicated probate because of foreign or disabled family members, or 3) seek more control in the event of incompetency than a power of attorney can provide. The other 2 types of trusts I mentioned, QPRTs and Credit Shelter Trusts, are irrevocable and are used primarily for the purpose of reducing gift and estate taxes, so they are substantially different from revocable trusts.

Given the recent significant changes to the federal gift and estate tax laws, it is quite possible that many co-op boards will begin to receive fewer applications for ownership by QPRTs and Credit Shelter Trusts. This is because under the new gift and estate tax laws, the percentage of taxpayers who are affected by gift and estate tax has been substantially reduced, and even for those who are affected by such taxes, the new "portability", which allows a surviving spouse to make use of the unused exemption of the first spouse, reduces, to some extent, the need for Credit Shelter Trusts. Of course, as noted by dsi1, the increase in the gift and estate tax exemptions will be somewhat offset by the increase in home values, which will increase the values of many gifts and estates. Nonetheless, it is my hope, even as an estate planner who makes a living drafting trusts, that fewer tri-state area residents will have to plan for the complexities of gift and estate taxes in the future. The estate tax exemptions of $1m or $2m that we had in the past may have worked out well for most Americans, but, as you can imagine, those who live in the tri-state area were disproportionately affected.

The issue of whether or not co-op boards accept trusts as purchasers will always be affected by the status of the real estate market in the local area. In a "seller's market" like we have this year, most co-op boards can avoid selling to trusts while purchasers compete for properties. When the tide turns, however, as it always does, in my opinion, co-op boards should allow the purchase of co-ops by revocable trusts that remain revocable by the grantor for the life of the grantor without the consent of another party. In the vast majority of revocable trusts, the grantor is also the trustee and can pay him or herself from the trust at any time for any reason. With certain basic documentation in place, essentially a standard occupancy agreement signed by the trustee and a guaranty of lease signed by the grantor, the co-op will be in the same situation in relation to the trust as it would be to a natural person. Whether the grantor transfers all of his or her assets to the revocable trust or not will be immaterial to the board, which can collect maintenance and other costs from either the trust or the individual or both. It is true that upon the death of the grantor the assets of the trust, including the co-op, will pass to other persons, but the same is true of individual shareholders when they die. Thus, for the most part, revocable trusts should not present problems for co-op boards.

When it comes to irrevocable trusts, however, such as QPRTs and Credit Shelter Trusts, more time and effort may be involved, and more issues are likely to arise. As dsi1 noted, the trust instrument would need to be carefully reviewed by counsel for the co-op. Since the QPRT can hold only the dwelling, and no other assets, a guaranty from the trust beneficiaries will be crucial, yet the trust beneficiaries will change after a finite term of years. An irrevocable trust may also contain a spendthrift clause which means that creditors of the beneficiaries cannot reach the assets of the trust. In fact, the beneficiaries themselves may not be receiving any distributions from the trust, depending upon its terms. In most situations, arrangements can be made that will provide the co-op with all the protections it needs (and I'm usually on the side of advocating that position), but irrevocable trusts do add an additional layer of complexity that smaller and less high-end buildings may understandably wish to avoid.

Hi,
Thank you this is quite informative. The problem with the revocable trusts, as I understood it to be was both the issue of the precipitous demise of the Grantor/Trustee, the inherent conflict with non-sublet bylaws, and the Coop's definitions of liquidity of Shareholder(s). Irrevocable Trusts are a real headache for us. There is also the problem of beneficiaries not seeing things the same way the Grantor did, or the intent/purpose no longer being relevant to them and thereby becoming litigious issues that the Coop would never have encountered on a normal shareholder purchase arrangement. Sometimes a Condo can be the better choice I guess. I greatly appreciate the detailed info, thank-you/dsi1

Anon - In my humble and non-legally-qualified opinion, you absolutely must discuss this with your board attorney as soon as possible. There may be interest and penalties associated with non-payment, even if you have not received any bills from the city in years. If that is true, and your attorney determines that you are liable for punitive charges, it will be a lot easier to get the City to reduce or eliminate them if you take the first step and voluntarily notify the City. If they eventually figure it out (and they will), they won't be so predisposed to working with you at that point.

At the same time you may able to negotiate with the City for a rebate of some of the charges based on their frontage calculations. Since you now have documented proof of your actual water usage, if the discrepancy is large there may be some grounds to negotiate. Of course, the City may simply tell you that this was the way it was done before direct metering and you're just outta luck. Discuss this with your attorney as well.

Consider the lack of invoices like tooth pain. It may not bother you for a while, but the longer you wait the more it will hurt in the end.

I am the President of a 111 unit co-op in Inwood, Manhattan. Our old patched roof was leaking into both public spaces and units (including my own).

In the past, the Board tried to do a quality job on its own (i.e. on the cheap) however the contractor didn’t finish the work, the co-op was unable to obtain a warranty and the roof needed patching. While doing a quality was the intent, it was unsuccessful in the end.

The Board and I had set our minds to doing the best job possible: hiring an engineer; repairing the parapets; replacing roof doors to code; replacing skylights; repairing the masonry on the elevator rooms and replacing the elevator room roofs; and replacing the insulation. The Board opted for a seamless covering too.

In the end, the roof looks fantastic, all of the leaks stopped, all of the units and public spaces were repaired and we use less energy for cooling. The engineers inspected, prepared the bid package and supervised the work. However, this process took longer and the Board spent time reviewing the engineer’s bid package for completeness. We used Rand. I would highly recommend them. The whole process took about a year and we already had the funds on hand (no assessment was necessary). It would have taken longer if we had to find financing.

The reason I say all this is - what is your reason for wanting to review the very lengthy engineer’s output: their report and/or bid package? Is it to litigate? Or are you offering to assist the Board with the process of repairing? Are you interested in how quickly the leaks stop (not a quick process if done right) or is your interest in making sure the job is done right the first time?

Remember that your Board is a group of volunteers. Offers of help are often well received while perceived threats elicit a defensive response. Put yourself in the Board’s shoes and see if a different track can get you the information you are seeking.

Good luck!

Did coop reimburse you for leaks in your apartment?

All units and public spaces were repaired at the cost of the co-op. No reimbursement was necessary.

The reason I am asking for the report is that I've had the same leak for 7 years. the board refuses to put anything in writing to tell me someday we will fix this. The management company wrote me winter 2012 saying we will fix this in the spring - never happened. The board needs to be accountable and put some thing in writing to indicate this will be fixed and they refuse. my ceiling is an eye sore and I can't sell or sublet my apt. in it's condition. I want accountability and for my burden a maintenance reduction.

As the report is necessary to determine the condition, future expenses of the building, and therefore the value of an apartment, it is unreasonable to withhold it. Caveat emptor.

First, please remember that I am not a lawyer. You need to check with your attorney for definitive answers.

That being said, I believe you have a right to ask every adult *occupant* to sign a release to do a background check. I also believe you have a right to ask for children's ages because you have a responsibility to provide window guards if there are children under 11 years old living in the apartment. Just be careful about when you ask anything about children; do so after you've determined that the purchasers meet your financial requirements. If you reject the purchasers for financial reasons after you've asked about children, they could turn around and claim discrimination.

Again, check with your attorney about what questions and releases you can ask for and when you can ask for them.

I don't believe you have a right to ask every adult occupant to sign a release to do a background check. Under the NYC roommate law any adult can have another adult as a roommate with no questions asked.
I do believe you have the right to ask for a list of people who will be residing in the apartment, and if minors, their ages.

Michael - You are correct. We do not do a background check on everyone who lives in the building. What we do during the purchase process is get releases from the purchasers and initial occupants (if they are not the same). Once we approve the purchase we do not run checks on any additional occupants. Thank you for pointing out the distinction.

While this forum is open to all, and you don't have to register to post, Habitat's policy is that if you are going to criticize a company, you need to identify yourself. The forum is designed to help board directors, not to provide a platform where anonymous posters can slur companies.

It helps neither boards nor residents if only some of the information is available.

There's an old saying that buildings should change the managing agent after a few years. This is usually said of old, that is pre-war coops which are small and trying to keep costs down. Opinions?
http://www.thecriticalmom.com

I agree that managing agents should be changed now and then, especially if they become complacent and don't have the gumption to deal with issues.

Managing agents should be changed periodically especially if same board is in power for years - when you have same management firm and board there are no checks and balances

I asked earlier, but maybe the question got lost. The building that I live in is looking to change management companies. Any suggestions on who to look to? Are there any that we should keep away from?

I guess this is going to sound like a plug but when we were looking to change agents Habitat was a wealth of information. I went to their yearly issue on Managing Agents and made a list of names after determining which agents managed buildings similar to our size, in our borough, in the price range we were looking for. Then I read the archived articles on what to look for in a managing agent and shared them with the rest of the Board. We then held interviews and ended up hiring our current agent. As for checking references, the agent we had, from a well respected managing agent family who had been with our co-op for many years, would have probably received a good one from members of our Board before it was discovered he was stealing large sums of money from his buildings. No names mentioned, he is out of business now, but you can also read articles in Habitat's archives and what to watch out for and insure for.
Hope this helps some,
Chris

The Council of NY Cooperatives (CNYC) publishes an annual directory of Co-op and Condo services. There is a section on Property Managers. You can contact CNYC for a copy or go to http://directory.cooperator.com

I agree with your post. I could be that a lot of management companies support this web site (and we dare not discuss bad practices?)

Bob

Bob, That's a mouthful and true. Stand back and don't discuss bad practices, just let them continue. How awful.

I don't know what the original post was and now I am curious. Is there any chance that it can be reposted?

John, If I remember correctly, it was nothing more than one poster's screed about some contentious issues with a managing agent. There was no useful information.

Steve, I disagree, it was useful information, if there is a problem with any managing agent people should be aware. If you read Carol's email it was taken down because there was no name attached to it and I agree with Bob, never shall we speak of bad practices and Why Not?
To John, let's hope that the information gets out so everyone is aware of certain practices. Possibly that person will re-post and not make it anonymous.

Thank you Steve,

I was curious about the posting because our building is looking into new Management Companies. Any suggestions? Any to keep away from?

Lee - I understand your point and in principle I don't disagree. Carol's stated reason for taking down the post was the lack of ownership. However, I bet there were a number of other unstated reasons such as legal liability for defamation, and also the simple desire to not have this forum become a way of engaging in any vendettas. Nothing drives away good contributors faster than having to slog through threads and threads of flame-wars. I am sure sponsor support was also a consideration, as you noted.

In my opinion, if an individual feels strongly enough about perceived wrongs done to them, they should state the facts in an objective manner without naming names, and then provide a way of being contacted offline for more information, including the name of the organization. This way, the information is made available, and the author takes responsibility for her/his statements.

Unless your bylaws or other operating document dictate otherwise, how many and who should interview perspective purchasers is really whatever works best for the individual co-op. The full board definitely does not have to be present, but the interview should be more than a one-on-one unless circumstanced dictate otherwise. Some buildings have admissions committees made up of non-board members, with just a single board member as the chair.

The size of the building and the turnover rate are two important factors. If you have hundreds of units and there is a contract signing on a weekly basis, the interviews should be shared by all board members or handed off to a dedicated committee. If your building has only 10-20 units and you have one or two sales a year, then it can be as many board members can attend.

Try to have all of the financial questions resolved *before* the interview. That way, if you decide to reject the purchasers because of finances you don't waste their time and yours, and you also avoid potential charges of discrimination based on appearance, personality and other perceptual traits.

The interview should be a friendly and informal getting-to-know-you meeting for both the board and the purchasers. In our building (73 units), we try to schedule interviews as soon as possible after the financial package is received. We do not wait for the monthly board meeting so as to accommodate mortgage rate lock expiration. We have a seven member board, and we usually have 3-4 members at the interview. Remember that the purchasers are usually very nervous at the interview and whatever the board can do to put them at ease gives them a much better feel about the building community, which carries over after they close.

P.S.: I work near the Dept. of Finance's Manhattan Business Center at 66 John Street and just tried to get copies of the appropriate forms there. I was told that they didn't have them and the forms were available only by mail. Thanks a lot.

Has anybody figured out how to get this form? I called 311 but they told me it would take 7 days for somebody to look at my request, and by then I'll miss the new 4/12 deadline.

I found forms for previous years at the link below (unfortunately you have to pay to download the form);

http://www.docstoc.com/docs/10580802/Exemption-And-Abatement-Application-For-Owners-Exemption-And-Abatement-Application-For-Owners---New-York

Try this link
http://www.nyc.gov/html/dof/html/forms_reports/property_forms_condo_coop.shtml

Carol, thanks very much for the link, but those appear to be the forms for the co-op corporation to file for the abatement for the whole building. The form that's proving hard to find is the one for an individual shareholder to dispute the designation of non-primary residency. We're now up to about 10% of the apartments in our building saying they ARE primary residences, despite the DOF's claims.

It appears to me that the website says that a letter will be mailed to you if Finance believes that you will be phased out since it is NOT your primary residence. I would think that letter would include the necessary form to contest their records. It does not appear to me that everyone must complete it in order for benefits to continue.
.
Phase Outs for Owners Currently Receiving the Abatement - DEADLINE EXTENDED
If you are an owner who is not using the unit as your primary residence and you received the abatement in 2011/2012, your abatement will be phased out. Non-primary resident owners include units that are held solely by a trust. We will mail you a letter soon letting you know if you no longer qualify for the abatement. Responses to this notice should be mailed by April 12, 2013 to:

NYC Co-op/Condo Abatement
P.O. Box 1194
Maplewood, NJ 07040

JG, you're right that DOF says they will send the appropriate forms to any affected residents. However, we have three residents in our building who want to contest the DOF's finding of primary residence, but they all say they received no forms at all in the mail. The only way we know about their non-primary status is through the DOF's summary sheet sent to our managing agent. These shareholders want to submit the required form, but they don't have it.

The DOF has posted the letter on their website. You can find it here: http://www.nyc.gov/html/dof/downloads/pdf/coop_condo_abatement/coop_condo_fact_sheet.pdf

Unfortunately, althought they say the necessary form is "on the back of the posted letter", it isn't. Here is the paragraph about contesting the primary residence ruling. If you do not receive the letter and/or the form, I would suggest you send your own letter to the address listed, certified, return receipt requested, stating that you wish to contest the ruling but never received the necessary form. That may preserve your right to protest.

"NOTICES
We will be sending notices to individual co-op and condo units that are no longer eligible for the abatement.We do not want any property that is owned by a primary resident individual to lose the abatement. If you are an individual owner of this unit and it is your primary residence, please complete and return the Primary Residence Verification on the back of this letter by April 12, 2013. This will ensure that you maintain the abatement. Responses to the notice should be mailed to:
NYC Co-Op/Condo Abatement
P.O. Box 1194
Maplewood, NJ 07040
Responses can be sent by certified mail, if you wish."

Thank you, Steve. It does indeed look like the DOF intended to include the form at the link you mention. "Please complete and return the Primary Residence Verification ON THE BACK OF THIS LETTER" - with no such form included in the .pdf!

Confusion seems to be rampant on this issue. Here's a similar discussion on StreetEasy: http://streeteasy.com/nyc/talk/discussion/34260-nyc-finance-letter-with-nj-address

I'm reviewing my coop's 2012/2013 CO-OP TAX BENEFITS notice dated March 4, 2013. Almost (but not) all of the units with no STAR credits are flagged with a small * to the right of the co-op abatement amount. The last page of the package is a special notice, stating that those * units may no longer qualify for the abatement per NYC records. Co-op managment has until Apr 1, 2013 to report any discrepancies of ownership that occurred on or prior to Jan 5, 2012. Contact coopabat@finance.nyc.gov with any questions.
Shareholders application for personal exemption at nyc.gov/ownerexemption has info, 2013/14 due date was 3/15/2013. No form available other than for dropping exemptions.

Hi Linda. I understand your concerns. The only municipal law or regulation I am aware of is a recently enacted law in NYC regarding rentals of less than 30 days. I don't know if it applies to condominiums or cooperatives, though.

The first place you should look is your condo's operating documents. There might be restrictions in those documents you can enforce. Also ask your condo's attorney. She/he should be able to answer any concerns you have. Condos are more like private property than co-ops, so your options may be more limited. Your organization's attorney is your best source for this kind of information.

Steve thanks for responding. We will take your advice.

Hi,

While I am not a STAR expert, I believe that some categories of STAR recipients have to reapply every year. Also, if your income tax return is reporting a different address, then you may lose the STAR credit because it is assumed that your co-op is not your primary residence.

It sounds like your co-op is assessing the STAR credit. If that is the case then you will likely have to pay that and I don’t think you can go back and correct things with the City & State.

April 1st is the deadline this year for the next TWO years. Be sure to reapply by April 1st.

Good luck!