Buying real estate in New York City can be overwhelming and confusing. Depending on where you want to live in the city, you will most likely be looking at apartment housing in the form of co-ops or condos. While condos are more common in other areas of the country, here in New York City, 75 percent of apartments for sale are co-ops.
While both co-ops and condos are apartment units in larger buildings, their legal structure is quite different. A co-op building is owned by a corporation run by a board of directors. When you “buy” a co-op, you’re really buying shares in the corporation and getting a proprietary lease of the unit as part of the transaction. A condominium, however, is a true purchase of a real property. You are the owner of your unit and a proportionate share of the common areas and get a deed reflecting that ownership.
If you’re considering purchasing a condo in New York City, it’s crucial to understand your rights and recognize potential red flags before committing to a deal. At Sishodia PLLC, our experienced New York City condo real estate attorneys can provide guidance and personalized solutions tailored to your unique situation. Don’t let the challenges of condo ownership deter your real estate goals. Contact Sishodia PLLC today at (833) 616-4646 and let us help you make informed decisions and secure your investment with confidence.
What Are the Disadvantages of Owning a Condo in NYC?
Owning a condo in NYC can lead to high monthly maintenance fees, strict condo board rules, limited privacy, and slower resale due to board approvals. Property taxes and special assessments may also rise unexpectedly, adding to long-term costs. Condos offer ownership but with shared control and rising expenses.
Supply and Demand Means There Are Less Condos Available
Today, real estate in New York is pricey no matter which you choose, but between co-ops and condos, it’s often a matter of supply and demand. Because the majority of the real estate available in New York City is co-ops, it makes condos more difficult to find, and when you do find one, it may be out of your financial range.
The demand for condos is also higher because of their more lenient stance on investors, international buyers, and subletting. In addition, more modern buildings with new and seamless amenities and condos are often the preference of those who can afford them.
| Aspect | Co-ops | Condos |
|---|---|---|
| Legal Structure | Own shares in a corporation, proprietary lease | Own real property, deed reflects ownership |
| Availability | 75% of apartments for sale | Fewer available, higher demand |
| Ownership Type | Shares in corporation, proprietary lease | Real property ownership, deed |
| Monthly Fees | Maintenance fees, no mortgage recording tax | Maintenance fees, mortgage recording tax |
But What if You Are Not Looking for Modern?
Part of the charm of many of the city’s co-op buildings is their old-world charm and prime locations. Many are pre-war structures with sprawling hardwood floors and beautiful architecture. For those who want more character in their living quarters, the sleekness and modern architecture of newer condo buildings leave them cold, despite the updated amenities.
Finding older condos in the more desirable parts of the city can be difficult. If you do happen to find one, demand and prices will be high.
Condos Can Be More Expensive
Because of their demand, condos can be more expensive. You are not only going to be paying more in purchase price but also in closing costs. Because co-ops aren’t considered real property, they are not subject to mortgage recording taxes at closing. But condos are. Mortgage recording taxes are charged at 1.80% of the mortgage if the loan amount is less than $500,000. If the loan is $500,000 or more, the mortgage recording tax will be charged at 1.825% of the mortgage.
In addition to monthly mortgage payments, taxes, and insurance, condos will also charge a monthly fee to unit owners for the maintenance, expenses, insurance, and other general upkeep of the building. HOA fees can and will go up periodically as the cost of maintenance and building expenses go up. If you find you are unable to keep up with your HOA payments, the condo has the legal right to foreclose on your unit.
Buyer Closing Costs Are Higher for New Construction Condos in NYC
When purchasing a new construction condo in New York City, buyers should be prepared for higher closing costs compared to traditional resale apartments. Typically, closing costs for new developments can reach up to 6% of the purchase price, while resale properties usually range between 3% to 4%.
The increase in closing costs for new condos can be attributed to several additional fees that are unique to new constructions. These include the NYC Transfer Tax, which varies from 1% to 1.425%, and the NYS Transfer Tax, ranging from 0.4% to 0.65%. Additional charges may also include sponsor attorney fees, document fees, contributions to the building’s working capital, and potentially a contribution towards a super apartment or a residential manager unit in larger buildings.
However, it is important to note that these closing costs are often negotiable. The developer’s willingness to cover some or all of these costs depends significantly on their motivation, influenced by the building’s sales progress. Developers who have met their sales targets are generally less open to negotiation, while those eager to sell remaining units post-construction may offer more flexibility. Prospective buyers should consult with a real estate attorney to better understand their negotiating position and potentially reduce their overall closing costs. For a consultation, contact Sishodia PLLC today.
HOA Boards
While co-op boards can be notoriously fussy and demanding, some condo boards are equally so. Some condo boards operate similarly to co-ops in an attempt to keep undesirable applicants out. One of the usual pluses of condo living is that HOAs are typically more owner-friendly. So getting involved in a condo with a very aggressive HOA can feel oppressive.
Special Assessments May Increase Your Housing Costs
When purchasing a condo in NYC, potential homeowners should be aware of the possibility of special assessments, which can significantly increase housing costs unexpectedly. Special assessments are one-time fees imposed by condo boards to cover unforeseen expenses or budget shortfalls for major repairs and improvements.
For instance, if a building requires urgent facade repairs or elevator replacements and the reserve fund is insufficient, each condo owner might suddenly face a hefty fee. These costs can arise without warning and often amount to thousands of dollars per unit, posing a substantial financial risk.
Special assessments reflect the reality that the building’s usual maintenance fees and reserve funds sometimes fall short of covering significant, unplanned expenses. In NYC, where repair costs can be exceptionally high due to the age of buildings and the difficulty of construction work, this risk is amplified.
Before committing to a condo purchase, it’s crucial for buyers to review the building’s financial health. This includes examining the most recent financial statements and the status of the reserve fund. A well-funded reserve decreases the likelihood of special assessments, providing more financial stability for owners.
There is no specific law capping the amount for special assessments in NYC, placing greater importance on the financial prudence of the condo board and the transparency of their financial management practices. Prospective buyers should consider these factors carefully to avoid unexpected financial burdens that could affect their investment and living costs in the city.
This awareness and understanding of special assessments are essential for anyone considering condo ownership in NYC, where such assessments can be a significant and sudden financial obligation.
What Are the Legal Complications of Owning a Condo in NYC?
Owning a condo in NYC can involve legal complications such as disputes with the condo board, unclear bylaws, restrictions on subletting, and obligations to pay special assessments. Owners must also comply with city regulations, handle liability for common areas, and manage conflicts over maintenance responsibilities.
Do You Have More Questions About Purchasing a Condo in NYC?
Whether a condo is right for you or not is often a matter of personal preference, aesthetics, and cost. Each building and governing group can have its own personality and it can help to work with a skilled NYC real estate lawyer who can offer insider insight.
If you need advice about purchasing real estate in NYC or are looking for an attorney who can go over your paperwork, contract, or closing documents, contact the New York City real estate lawyers at Sishodia PLLC. Contact us at (833) 616-4646 or schedule a consultation with us via our online contact form.
