Hi Ellen,

I like the original thinking here. I have a concern however that the Board has created two classes of shareholders: those who participate in this; and those who don’t. Moreover, the Board is transferring funds which belong to everyone (interest) to those in the new group. For this reason, I believe it needs to be shut down. Please consult a lawyer on this.

Theoretically, it could work if all shareholders participate (use of common funds) and all shareholders can borrow but I think that would mean a large sum of funds and prove difficult to administer.

Steve

Hi Carol, Do you know if the "descending penalty over a yield maintenance" you mentioned is another way of describing defeasence? If it is, there is a Habitat article you will be interested in called "Defeating Defeasence" by Ronda Kaysen. It's in the Habitat archives, issue #287 (March, 2012).

Steven Rosenstein:
I am concerned about statements made regarding the advantages of a 10 year (assumed interest-only mortgage) versus a 30 year (assumed self-amortizing) mortgage. Mr. Winter states that a Co-op mortgage has a certain resemblance to a car lease and that Co-ops are essentially leasing money for a certain period of time. Mr Niland makes the assertion that a board cannot make a decision in 2011 that will be valid for the building in 20 or 30 years, and that the desire to go for a longer period is to save closing costs, but that the decision for a longer term mortgage will end up costing the Co-op more. The comparison between leasing an automobile and a Co-op's "leasing money" is arguably false. At the end of a car lease, the vehicle is returned to the lessor, and the lessee is free and clear of any further obligations. The same is not true of a Co-op building. At the end of a 10 year interest-only mortgage, the board cannot simply return the building to the mortgage holder in lieu of paying off the mortgage amount. Well, it could, but all the shareholders would be rather upset with the board. With an interest-only mortgage, a Co-op board is not just blithely "leasing money" but is instead kicking the mortgage day of reckoning 10 years down the road. As for a Co-op board's risk of making a decision in 2011 that would not be valid 20 or 20 years later, the exact opposite is true. The board has no way of knowing the interest rate in 10 years. A 4% rate today could quite easily double to 8% in 10 years. It could be even more during a period of high inflation. The Co-op with a 10 year mortgage will have a very small window in which to refinance the mortgage. With a self-amortizing mortgage, the rate is both fixed for the life of the mortgage *and* the underlying principle owed on the building is paid down. This is much more conclusive to long-term planning and budget stability than playing interest rate roulette every 10 years. An additional advantage with a 30 year mortgage is that if interest rates drop during the life of the mortgage, the mortgage can be refinanced on more favorable terms without the egregious pre-payment penalty described in the article. Finally, how, exactly, does opting for a one-time longer term mortgage end up costing more than paying new closing costs decade after decade after decade? The overriding concern I have is that both Mr Winter and Mr Niland, as principles in commercial mortgage and real estate loan companies, clearly have it in their company's best interests if Co-ops closes on a new mortgage every 10 years in perpetuity instead of a single 30 year commitment that never has to be renewed. The statements made by Niland and Winter need to be much more fully justified instead of simply accepted as true.

Matty - I guess it's true that our digital lives live forever. :-) I wrote that a few years ago, but I feel it is as true today as it was back then. Thanks for re-posting them here.

Hi,

I am a co-op Board president and a finance manager with a multi-billion dollar corporate pension fund. Co-ops and pension funds are similar in that long-term financial planning is absolutely necessary.

I cannot think of a single situation where I would recommend an interest only mortgage, ever. I would recommend either a 10 year mortgage with a 30 year amortization or a 30 year amortizing mortgage.

Assuming that a co-op is not a new building, the mortgage is probably funding capital repairs and improvements. Things wear out and will continue to do so. Having a break in the mortgage every 10 years or so gives the then Board the ability to fund necessary capital repairs if funds do not already exist (of course the preferred method is saving up ahead of time). The amortization recommendation allows the co-op to lower the debt to building value ratio. As we have seen, the assumption that building values will always go up is false; or rather the assumption that the value will always be higher when funds are needed is false. Lowering the principal on the mortgage shows the lender two things: the co-op is serious about sound fiscal management; and provides higher security (loan coverage) for the loan and thus the potential for a lower rate.

I would recommend a 30 year amortizing mortgage for a co-op with a continuing culture of strong fiscal management only where they would set-aside funds on a regular basis for capital repairs and improvements sufficient enough where tapping the mortgage would not be necessary.

Good fortune to you all!

Hi Steve - Thanks for the info and comparison between the 10/30 mortgage and the 30 year self-amortizing. We are (fortunately) in the latter category. We are 5 years into a 10 year interest only and I would dearly love to be able to re-finance with a 30 year self-amortizing loan at today's very low rate. I can't, though, because of defeasence. Right now this outrageous "prepayment" penalty would add another 20% to the principal amount. So we wait wile the mortgage expiration date gets closer and hope that the rates don't go up too badly when we finally are in a position to refinance.

A Coop Board should use, in all cases, in securing the best deal available a licensed banking or brokerage firm for these deals and NOT the management company that they hire to do all else The 10\1, I\O with a 40 year amoritazion is the best product for a host of reasons and never should one accept yield maintenace as the pre-pay penalty but rather a descending prepayment penatly, for example, a 5\4\3\2\1 where there is in the last year there is a 90 day window to refiinance again w\o a penalty !

Most of these transactions are, sadly, handled by the management agent for these coop's and never do they get the best deal, again, for a host of reasons. Also, the 'points' charged should never exceed .75% of the loan amount, both for the first and the LOC by bank\broker, in total

mortgage@richlandequity.com

Elect a new board. Hopefully you'll be able to do that before the 2013 swimming season startts.

I am so tired of Mr. Rosenstein's typical answer "elect a new board" to anything wrong at Board level. I live in an upscale well educated community with almost 3000 residents and can assure you our board is so entrenched that unless they back a candidate you can not get elected. Even when some of the most egrious or illegal acts are committed residents are either snow birds or empathetic but not willing to do anything. The strongest campaign shows almost no results for board change if you are not blessed with the Board's approval. We always have challenged elections, so there is no shortage of people who want to see a change,but they can never get enough votes to win. So, your answer "get a new board" is silly. You have to deal with what you have not wish for changes. First, check your black book, proprietary lease and house rules and see if use of the pool by members only is mentioned and then make a complaint based on the written word. You will have to get other residents to agree with you and, perhaps start a petition. But, first and foremost, check to see what is allowed and then get your supporters to take action against the existing board through letter writing, petitions, phone calls, etc. Annoy them enough to perhaps want to get you out of their hair and act accordingly. Don't give up. Good luck and keep us updated.

Hi, Dianne.

We don't generally have trouble with an entrenched board because most of the shareholders spend less than three years here (a few of us have been her 15+ years). Four of the six board members have been here less than five years. We have condo units as well. The people who run are those who want first dibs at apartments or have a nanny state agenda, or political ambitions, all of whom would fit easily into one of Dante's levels of hell.

We have checked the proprietary lease and there is no mention of the pool or health club. There is also no mention In the "House Rules," or the by-laws. In the Health Club and Pool Regulations is the only place it's mentioned; it says the pool and health club are "private." Three paragraphs later it states that there are guest passes available. These were originally intended for people visiting shareholders, but now there is an incredible abuse of the practice as the number is no longer limited.

Thanks for your support, Dianne. Will keep you posted. Will do a petition tonight.

Hi, All. Thank you again for your input. It seems that our board discussed the issuance of passes with management, but not the particulars. The board president seemed genuinely surprised at the idea that there were an unlimited number of passes being distributed. So, we'll see how this all works out. He agreed that there needed to be limitations.

The treasurer actually gave an excellent presentation but there are still some questions remaining.

Diane & PC - I appreciate your frustration. There is nothing worse (or more painful) than banging your head against a wall and not making a dent.

Unfortunately, in most instances where I suggest some sort of board reconstruction, it is the only practical way of accomplishing what you want. The laws and regulations governing co-op operations and the business judgment rule make most challenges to board decisions (like the number of pool passes) very difficult to attack and overcome from any angle. The board can simply say that they were using the passes to raise income for the co-op. You would have a hard time showing they were not exercising their fiduciary responsibility.

I sense your frustration is in not being able to convince enough shareholders to support your positions or your candidates. Unless there is some sort of vote rigging or other shenanigans going on during your votes or elections, or what the board is doing is contrary to the co-ops governing documents, I don't believe there is any practical way (other than replacement) to compel the board to change their actions.

Diane is absolutely correct about organizing other shareholders to write letters and otherwise let their displeasure be known. But I got the sense from PC's initial post that this has been tried with no effective results. If the board is entrenched and intractable, then in my opinion the only solution is to mount an effective campaign to elect more favorable members to the board.

If I sounded glib, I apologize. I certainly hope PC is successful in organizing whatever campaign she/he can to get the situation changed.

I suppose I should not be using your first names. I'm sorry.

However, I do want to respond to fiduciary responsibility. I can't prove voting shenanigans but that's how I would describe their management of the finances. I think the board members got worse grades than I did in algebra. Questions about loans and the spending down of our reserve fund will hopefully come up at the meeting.

As to making money on passes, it may be the case that it's raising some money, but when does an amenity become a public space? Even our lawyer needs to research that one!

We pay very high maintenance. Also, there's no enforcement of the rules with regard to passes. Did I mention that the pool is in the black by six figures? I will be organizing and agitating, and getting signatures, and will let you know what happens.

In my 15 years of living in this co-op, the two consistent qualities I have observed in our board members is self-interest and conflict avoidance. One is annoying--a present board member is a ping-pong player and thought it might be a good idea to have a ping-pong table near the pool--and the second is disastrous. The board minutes are minimal and 8 months behind; no shareholders can attend meetings, nor can we observe; and the board has not held an informational meeting for a year. We were never notified of the change in the rules with regard to passes. Thank goodness, we're selling. My wife and I will never live in another co-op again

Steven: If only we could. This is an giant, apathetic NYC co-op, and there are maybe 50 of us who use the pool regularly. Some of these people are from neighboring rental units (from a pre-co-op formation) and do not vote. I'll make a fuss at the board meeting but this is the kind of place where veiled threats work better. That's why we intend to move very soon.

Peg - Contact the insurance company who carries your unit-owner's policy. They may be able to advise you on what further steps you should take, and your policy may cover reimbursement for immediate out-of-pocket expenses.

Before you sign anything, especially anything that even remotely looks or smells like a waiver or release, have the documents reviewed by an attorney. You could be signing away important rights you will need later on if you have a claim against your condo corporation.

Better still, just consult an attorney. I cannot imagine the aggravation and frustration you and your mom are going through. You need an independent party to look after your interests in this because you have more important issues to take care of right now.

My best wishes to you and your mom in getting through this.

Good advice from Steve about contacting electeds. My family is in a similar displaced situation also in Nassau County and we have had remarkable success with both our insurance company and FEMA. Final inspections by both were this morning at 7 a.m. Have you started the ball rolling with FEMA? If not, do so TODAY.

Dianne - It was actually P.C. Semkey who recommended contacting Peg's elected officials. I just recommended contacting their insurance company. I used to live near Lido Beach and would go bikeriding on the Long Beach boardwalk. Even a small storm would displace sand a block or two from the boardwalk, so Sandy must have moved the entire beach inland.

Thanks, I realized my error after I hit post, but didn't want to post again. So, I gave you credit were it wasn't due, but you were gentlemanly enough to correct me. I, too, lived there, what a tragedy.

I could not help but be moved by your plight. I am a newbie on this site, but if I were in your position, I would begin with calls to my elected officials. Tell them your mom is a senior citizen. This sort of problem is what politicians are made for. Begin with your Senate rep, the Democrat Bill Nelson

http://www.billnelson.senate.gov/contact/offices.cfm

And Marco Rubio:

http://www.rubio.senate.gov/public/

If you have the equivalent of New York City's City Council, call your rep there, and your state senator, Vern Buchanan:

http://www.buchanan.house.gov/

As an elected official of mine once said to me: "We love to get calls that give us something specific to do. It wins votes." Good luck.

"Condemned" generally means hazardous and/or unsafe for occupancy or use when applied to a building. A building can be repaired or demolished depending on the circumstances to make it safe. Therefore, in addition to contacting your management company and building manager - call your coop board members. They should be on top of this situation.

Most often condemned properties can be repaired and then reinspected and people can move back as soon as safe for use and/or habitation.

The Towers apparently took a beating, but it does not mean people will necessarily loose their homes or investments. However if repairs are made it is possible in a condo or coop that further assessments to cover those costs can occur. The silver lining is one can return home to the beautiful towers.

Contact FEMA to assist with temporary living arrangements.

Seena Amsel
a concerned Lido Beach resident

MK - You were given good advice the first time you posted about this in October. Did you follow any of that advice and what was the outcome?

The wheels of justice turn slowly my friend and I am doing all I can to resolve the situation. I have spent much of my time going from the police who sent me to landlord tenant- who sent me to DA-who sent me to Supreme Court to subpoena the video. Then my electric went out for a week and I returned to Supreme court yesterday and found out that I have to have a law suit in progress before I can subpoena. I don't know why they did not provide this information on my previous visit. I am doing all I can, but in the meantime I have other aspects to my life and feel the need to remove myself from an unsafe location. The board has spoke with the MA and they too are useless. They like the super because he does cheap renovations on co-op time, but when he replaced a sink 2 floors below me I went without water for 3 days. Recently a board elections when a fifth person was needed and no one wanted to do it I raised my hand. You could have heard a pin drop. Rather than have me on the board one of his ardent supporter of the super's raised her hand so she could protect him. Some of the information provided previously was for NYC only which doesn't help me because I am on long Island. I have found an advocacy group that services Nassau and Suffolk and I am working with them. But I am not functioning at my normal level and have become fearful and very depressed. I take advise from this site but it is not always correct though I still appreciate it.

Can you name the advocacy group - I may be able to help.

Long Island Housing Services
640 Johnson Ave suite #8
Bohemia, NY 11716

I have to write a narrative, but I am in the process of packing to move and I finally got a decent job, even though it is part time. I am experiencing trouble sleeping. It is too much at this time especially since looking through the material is very upsetting. I have e-mails, video recording (of my own) and sound recording. I did this because a little over a year ago was when I encountered the first horrendous situation, the board did not treat me fairly and the Board president is in the habit of insulting me. This is when "he said allegedly to me". Basically he likes to call me a liar. I had an ant problem for 2 years and he said "well their not harmful are they" I responded “I don't like it when they crawl on me”. Meanwhile another board member had discovered ants in his sink one morning and I asked him how he got rid of them and he said he called the super who called in an exterminator. The super told me to go to home depot and buy ant bait traps. There is so much more and writing the narrative will be like writing a book. I could print out all the material including the nasty notes the super slipped under my door etc and present it, but to write a narrative at this time is extremely difficult and my main focus is removing myself from the premises so that I can feel safe. I would greatly appreciate any help and thank you for the offer.

Can you name the advocacy group - I may be able to help.

This is what happens when you have a corrupt Superintendent and a Board that turns away in denial because they get treated very well. It is a very difficult situation.
Keep a precise log and send them certified letters of the incidents.

This is a question you should be posing to your Condo's attorney. Your governing documents will need to be reviewed, and probably the laws and regulations governing the rights of Condo owners vs the Condo's board of managers will come into play. I asked a Trust & Estate attorney I know, and she said that right now an estate has all the rights of the deceased owner, but that there are changes slowly being made which will give a Condo board powers similar to those enjoyed by Co-ops.

Bottom line: Consult your attorney.

Thank you so much for your feedback. It is most helpful.

We weathered the storm but can do better. We are now starting to develop a full blown emergency plan and will be evaluating new safety features such as backup generators, enhanced signage, and redundancy in our sump pumps and key lifesaving equipment.
Another important aspect communication, we want people to understand the process. Heads up to all coop board members and managing agents, people should not store excess gas in their apartments or parking space, we have already had 2 such instances since the storm.
If anyone has experience with backup generators, please post your thoughts here so we can all learn from your experiences.
Thanks

Hi, Have you been in touch with the Board at the Osborne (205)? If not I will give you their info. Now I understand we are all in our hotels until Sunday or Monday. Good luck,
ellen

Ellen, thanks for the reply -- and yes, I've been in touch with the board president at the Osborne, who was extremely helpful. (He and a resident of my building are both on Community Board 5.) After considerable work by everyone involved, the displaced residents of my building who had no place to go are now in a hotel in the Times Square area. If the crane work on Saturday and Sunday is successful, we're supposed to able to return to our homes on Monday. Let's hope that's the case!

The police and other agencies finally allowed our residents to make emergency visits into the building to pick up medication and similar items. After the initial frostiness and rebuffs of the early days, the police were actually quite friendly and understanding when my family made our short return visit.

Lots of interesting stories to tell when this is over. It has been quite an experience.

Dear Carl, thanks for the note. My experience is exactly how u described, although I think it was too kind to call the initial police attitude frosty. They actually tried to arrest me when I tried to get by to go upstairs for my medication and such. I am in a times sq hotel now with my 2 dogs. I thought we were going to b allowed home today but apparently not. Oh well. Hotel life is not too bad! All the best, Ellen

Ellen, I'm sorry to hear that the police actually tried to arrest you for getting your medicine! That's awful. We had one couple in our building who needed their passports for an international trip and couldn't get to them. Luckily, the absolute lockout was lifted with just hours to spare.

It has been a stressful period for all of us. I spent many hours on the phone and on the computer with Extell and our residents on Wed/Thurs/Fri ensuring that everyone had a place to stay. Our contact at Extell has been working very hard to find hotel rooms and portion them out fairly. And our residents have been cooperative and responsive.

By the way, I can't stress enough how valuable it was to have an e-mail list for the whole building. I sent 173 e-mails in a 48-hour period and was able to keep everyone informed. Residents were able to let me know their own situation and also pass along news items. (We have both a 1010 WINS reporter and a CB5 member in our building.) I send all e-mails using bcc: so the e-mail addresses remain private.

Dear Carl,
Nice chatting with u. Just wanted to report that I am as snug as a bug in a rug this morning! I want to give thanks to our board members and Pres Joe Ferrara and especially our fearless building manager all who worked tirelessly to get us secured and then home.
Ellen