A phenomenon
that's limited almost entirely to Manhattan, cooperative apartments have been
the traditional form of owning an upscale apartment for close to a hundred
years. In fact, in New York City, 85% of all apartments available for purchase
- and almost 100% of the grand pre-war apartments on Fifth, Park and Central
Park West - are in co-operative buildings. Co-ops are owned by an apartment
corporation. When you purchase within a co-op building, you're purchasing
shares of the corporation that entitle you, as a shareholder, to a
"proprietary lease." Generally, the larger your apartment, the more
shares of the corporation you own. Co-op shareholders contribute a monthly
maintenance fee to cover the building expenses. The fee covers such items as
heat, hot water, insurance, staff salaries, real estate taxes and the mortgage
indebtedness of the building. Portions of the monthly maintenance fees are tax
deductible due to the building's underlying mortgage interest. Also, shareholders
can deduct their portion of the building's real estate taxes.
A co-op Board of Directors has the ability to
determine how much of the purchase price may be financed and minimum cash
requirements. Subleasing a co-op can be difficult. Each co-op has
its own rules and they should be carefully reviewed prior to application to
purchase.
All prospective purchasers must interview with the
Board of Directors. Prior to the interview, prospective purchasers prepare a
detailed "Board Package" which usually contains personal and
professional letters of recommendation as well as a great deal of personal
information concerning income and assets. The experience of a broker is
invaluable. Your broker can help you find an apartment in a building that suits
the needs of you and your family. In addition, your agent will help you prepare
a package that you can confidently present to the Board of Directors once
you've found the home that is right for you.
CONDOMINIUMS
As more and more
new buildings are constructed in New York, condominiums are fast gaining in
number and popularity. It's not surprising. As opposed to a co-op, a
condominium apartment is "real" property. A buyer receives a deed
just as though he or she were buying a house. Each individual apartment in a
condominium receives its own tax bill. There is still a monthly common charge
similar to the maintenance charges in a co-operative. These charges don't
include your real estate taxes and are not tax-deductible. They also tend to be
lower than in co-ops because there is no underlying mortgage for a condominium
building. The straightforward nature of buying a condo coupled with the fact,
that in some cases, you can finance up to 90% of the purchase price and sublet
them at will, makes condominiums the number one choice for flexibility.
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