Whether it is a prenuptial agreement, a separation agreement, a real estate purchase or sale agreement, contract for an easement, purchase or sale of a business, employment contract or a contract to perform construction, contracts are a means with which we set forth our intentions and legal obligations. One of the most important transactions a person will make during their lifetime is the purchase or the sale of a home. In today’s real estate market, that purchase or sale may involve a co-op, condominium, single family or multi-family residence. It is of the utmost importance that the purchaser and the seller be made aware of the benefits and the disadvantages of that contract and made fully aware of each and every term since this will set forth their legal obligations.
A condominium is a form of ownership in which there is a separate deed and tax lot designation for the unit being purchased, and sometimes it can be an apartment or a town house. The purchaser also has an undivided interest in the common areas. This usually is the walkways, recreation facilities, private parking areas etc. For an apartment building the common areas will most likely involve elevators, hallways, lobbies, basements and also common parking areas.
The co-op form of ownership is distinguished by the ownership of stock in a cooperative corporation and the purchaser acquiring a proprietary lease for the apartment. The number of shares of stock allocated to the apartment is usually based upon the size of the unit. For example, a three bedroom/three bathroom apartment will usually have more shares of stock allocated to that unit then a one bedroom/one bathroom apartment. Both the co-op and the condo will usually be regulated by the by-laws, which set forth the rules to be followed by everyone living in that condominium or co-op apartment building. It is important to become familiar with the by-laws because sometimes they can be quite onerous, example being prohibiting unit owners of placing holiday decorations on one’s door or in the windows, leaving boots and umbrellas in hallways, or prohibiting pets in the apartment. In both a condo and co-op form of ownership there will usually be a monthly charge for the upkeep and maintenance of the common areas, and of course the size and type of the common areas will usually determine the monthly cost of maintenance. When selling a co-op it is not unusual for the by-laws to provide for flip tax. The flip tax is usually paid by the seller and is based upon the number of shares allocated to that unit. For example, if 100 shares of stock are allocated to the unit and if there is a flip tax of $1.00 dollars per share, at the closing the seller will be required to pay $100.00 towards the co-op association in order to close.
When purchasing a co-op it is most important to not only study the board minutes but also study the cooperative’s financial statements for the previous years in order to determine if a co-op is operating at a profit or loss. For a purchaser, this is extremely important information because this will tell if the purchaser is looking at a large capital improvement expense after moving in, which will be pro-rated over a number of years and assessed to all unit owners. A perspective co-op or condominium unit holder or a purchaser of a single family home will also want to know if there were any improvements made to the premises which were performed without the cooperative’s approval or made without obtaining a proper certificate of occupancy from the local municipality.
Another important piece of information for a purchaser is to determine if any liens have been assessed against the property for work performed by any contractors. These liens will have to be addressed and satisfied prior to closing so as not to obstruct the purchaser’s rights to the unit. Another distinguishing feature of a cooperative is the requirement for the developers to make certain filings with the New York State Attorney’s Office prior to the sale of any unit in the cooperative. The purpose of registering with the Attorney General is to place perspective unit holders on notice and to require the developer to make certain financial disclosures of material facts to the Attorney General and to the perspective unit holders.
In our practice we have observed many people willing to enter into a contract without fully understanding the terms to which they would be obligating themselves. In many instances have already entered into a contract without the benefit of understanding all the terms to which they have agreed. This can occur when entering into any type of contractual relationship whether it be in connection with the sale of real estate, the purchase of a business or signing an employment contract, just to name a few.
Without a clear understanding of the legal and financial consequences that a person is about to obligate themselves, one should not sign a contract. At Rogers, Habas & Eisen, PC, we make it our business to ensure that our clients fully and effectively understand their contracts before signing. When they leave our office, they do so knowing that they are working with attorneys that are invested in addressing their questions and concerns and that their best interest is in capable hands.