Co-op Boards Consider Condo Conversions

Converting co-ops to condos can be a tough choice for residents and boards.
Co-op Boards Consider Condo Conversions
The Co-op and Condo Expo in New York was well attended on Tuesday. (Charlotte Cuthbertson/The Epoch Times)
Charlotte Cuthbertson
4/8/2009
Updated:
10/1/2015
<a><img src="https://www.theepochtimes.com/assets/uploads/2015/09/condo.jpg" alt="The Co-op and Condo Expo in New York was well attended on Tuesday. (Charlotte Cuthbertson/The Epoch Times)" title="The Co-op and Condo Expo in New York was well attended on Tuesday. (Charlotte Cuthbertson/The Epoch Times)" width="320" class="size-medium wp-image-1828895"/></a>
The Co-op and Condo Expo in New York was well attended on Tuesday. (Charlotte Cuthbertson/The Epoch Times)

NEW YORK—Converting co-ops to condos can be a tough choice for residents and boards. Under a conversion, unit leasees would become unit owners and a single title for their unit would be created—the shares of stock are replaced by a deed. Maintenance fees decrease, replaced by a mortgage, and owners can build equity on their home. The corporation can also collect outstanding debt at the time of the individual closings.

Unit dwellers often find change daunting and boards don’t want to lose control, especially of the screening process, said James McCarthy, principal attorney at McCarthy Jennerich. “They don’t understand the money side of it.”

McCarthy was speaking at the Co-op and Condo Expo in New York Tuesday. He said changing a co-op to a condo in a down market makes sense for getting attractive packages from the banks. “Banks are financing at attractive rates and terms … and they simply lend at better rates to condos.”

After conversion, the activity generated often results in sales, he said. Condos generally sell three times faster than co-ops, and sell for closer to the asking price. Condos are also priced above co-ops.

Helene Kline, co-op board member of the Riviera Towers Corporation on the Hudson River, said her board has considered converting the 428-unit building. “In the past we’ve looked into it—the [conversion] cost was prohibitive,” she said. “I’ve heard pros and cons for both ways.”

Kline said the board would not rule out a conversion in the future.

Attorney Robert Jennerich said the fees at conversion include: the proportionate share on underlying mortgage, title work, insurance, conversion agent fee, any capital projects, and bank fees. One conversion that took place this year had a starting value of $300,000 for a co-op. The building had 106 one-bedroom units. It cost $70,000 to convert to a condo and the resultant value as a condo was $510,000—a 36 percent increase.

Usually a favorable vote of 75-80 percent is required by residents to make a conversion decision. “And it does not get there unless the Board is entirely behind it,” McCarthy said. During the conversion process corporations update the governing documents for the community. McCarthy said some co-ops can take years to convert and he works with banks to secure “creative” packages such as reverse mortgages for the elderly.

Associate Broker from Coldwell Bank, Lee Presser, said there are some definite pluses to co-ops retaining their status. “It’s not a bad thing for boards to retain control.” Presser said co-op boards can be even more vigorous than banks in background checks. “Co-op boards are more fiscally conservative than banks.”

He said he had heard of 75 recent foreclosures in Manhattan, and none of them were attributed to co-ops.

The Co-op and Condo Expo in New York was a hit this year, with more than 2,000 attendees by 2pm. Exhibitors were busy catering to board members, property managers, shareholders, and maintenance staff.

“We are trying to get to the people with the buying power,” said event manager Joanna DiPaola.

The Hilton was abuzz with businesses offering services in building management, maintenance, insurance, security, energy and many more. Two more expos will be held in the series run by the paper The Cooperator. The Boston event will be on May 7 and New Jersey will be host to an expo on May 14.