1. Why do I need an attorney to represent me when buying or selling my apartment or house?
When buying or selling residential real estate, the two fundamental events in the process are: 1) the drafting and/or negotiation of a contract of sale; and 2) attendance at a closing where a seller transfers his/her ownership rights in the property being sold to the buyer. For the process from the contract to the closing to run smoothly, several interim steps must take place, and a lawyer will make sure that these steps are handled properly and that a client’s interests are adequately protected.
By way of example, in a typical transaction, a lawyer will review a seller’s contract with his/her real estate broker to ensure that the contract is fair to the seller. A lawyer representing a seller will then draft a contract of sale for the property. A lawyer for both a purchaser and a seller will help to navigate discussions regarding the personal property that will or will not remain in the subject premises, or repairs that a seller is or is not obligated to make prior to the closing. All of these considerations will be memorialized in the contract prepared by a seller’s attorney and reviewed by a purchaser’s attorney. A lawyer will also review the property inspection reports that must be prepared by a seller. A lawyer representing a purchaser will conduct a title search to make sure a seller has clear title to the property that is being sold, and will assist to resolve any issues with respect to title prior to or at the closing. In cooperative and condominium transactions, an attorney representing a purchaser will conduct due diligence on the apartment being purchased, and the building in which the apartment is situated. This diligence includes the review of minutes from the board of directors meetings, the review of condominium offering plans and the amendments to these offering plans, the review of the building’s bylaws, rules and regulations, and the review of the building’s financial statements. In a cooperative setting, a lawyer will also assist a purchaser in handling the process of obtaining the approval of the cooperative’s board of the directors to purchase the subject apartment. Likewise, in a condominium setting, an attorney will assist a client through the process of obtaining the condominium’s board of director’s waiver of its right of first refusal. Additionally, when representing a purchaser, a lawyer will assist him or her to secure financing to purchase the property. This assistance includes reviewing the mortgage application submitted by the purchaser to the lending institution, reviewing the mortgage commitment letter issued by the bank from which a buyer has obtained financing for the apartment, and ensuring that the conditions set forth by the bank in this letter have been satisfied by the purchaser prior to the closing.
Finally, at or prior to the closing, a lawyer will prepare the deed and/or other closing documents. A lawyer will also take on the obligation of ensuring that a closing runs smoothly, and that all of the necessary attendees are present, all of the requisite paperwork is signed, and all of the checks and other payments are issued and transferred properly.
2. What are some of the differences between a cooperative (“co-op”) apartment and a condominium (“condo”) apartment?
When one purchases a co-op, title is transferred from a seller to a purchaser by the transfer of ownership of stock in the co-op corporation and a proprietary lease for the particular apartment being purchased. Technically, an owner of a co-op apartment does not own a parcel of real estate, but owns a proportional number of shares of stock in a corporation. Additionally, before a seller can transfer the stock and proprietary lease to a purchaser, in most instances, the board of directors of the co-op must approve the sale. This can be time consuming and a rejection of a potential purchaser will result in a deal not taking place.
When one purchases a condo, title is transferred from a seller to a purchaser by delivery of a deed to the condo being sold. An owner of a condominium actually owns real estate, and the obligations that attach to owning real estate, such as the payment of real estate taxes, apply accordingly. Unlike a co-op, a condo’s board of directors does not need to approve the sale of a condo to a potential buyer. However, a condo’s board of directors usually retains the right of first refusal to purchase the apartment, and a potential purchaser must obtain a waiver of that right of first refusal from the condo’s board of directors, before the sale of the condo may occur.
3. In a co-op setting, who owns the apartment building?
A corporation usually referred to as a “co-op corporation” typically owns the entire building. The co-op corporation then issues a proportionate number of shares of stock in the co-op corporation for each apartment in the building and issues a proprietary lease for each apartment. Typically, the number of shares of stock allocated to an apartment depends on the size of the apartment, in connection with other factors, such as whether the apartment has a terrace, for example. The apartment “owner” is referred to as a “proprietary lessee” or “tenant-shareholder.” Frequently, the co-op corporation takes out a mortgage on the entire building. The monthly mortgage payment on the building’s mortgage is then built into the monthly “maintenance” charge paid by all of the apartment owners, and is divvyed up on a proportionate basis. Therefore, as a technical matter, an owner of a co-op apartment may actually be paying off two mortgages - - the first being the mortgage on his or her particular apartment, i.e. the stock and the proprietary lease, and the second mortgage being the mortgage on the entire building.
4. Who manages a co-op apartment building?
The board of directors of the co-op makes the major decisions with regard to the operation of the co-op. However, day-to-day tasks such as collecting monthly “maintenance” payments, cleaning the building and doing routine repairs may be contracted out to others