The majority of New York City residential buildings – about 85% — are co-ops. These apartment-style buildings which may range from historic pre-war structures to trendy high-rises, are structured as corporations. Within a co-op building, residents do not own their specific unit. Rather, individual owners each have shares of the corporation according to the size and value of their unit. While co-ops offer the most options in terms of the number of such residences in the city, co-ops come with many conditions of purchase and restrictions on their use.
Prospective co-op purchasers must submit a detailed application with a processing fee and comprehensive personal and financial information which is reviewed by the co-op’s board of directors, which is comprised of residents who are volunteers. In addition, the prospective buyer is subject to an in-person interview by the board. The review and approval process can take 30 to 60 days. In addition to approving a prospective resident, the co-op board may determine how much of the purchase price may be financed and minimum cash requirements. The guidance of an experienced real estate agent such as Thomas Wexler is enormously helpful during the co-op application process.
Those residents who own in a co-op are called shareholders. In addition to their personal monthly mortgage payment, co-op shareholders must each pay a monthly maintenance fee to cover building expenses such 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.
Co-ops place a number of restrictions on the use of the residence which generally include whether the unit may be rented to others (sub-let) and the duration of such a lease or whether roommates are permitted in the building.
Co-ops are not recommended for those who want to move-in quickly, who are relocating internationally, who do not want to share their financial or personal information or who cannot produce an established credit history.