Chapter 17 - Condos and Coops

Question 1

80/20 Rule

Answer 1

Condops - no more than 20% of coop’s annual income can come from non-shareholder sources (retail/commercial tenants) so shareholders can continue to write off taxes/mortgage interest.

Question 2

Alteration Agreement

Answer 2

Written agreement signed by coops shareholder-tenants before renovations can begin.

Question 3

Assigning a Contract

Answer 3

Assigning purchase rights to another buyer before unit is closed - used in flipping when investor wants to flip pre-construction.

Question 4

Board Package

Answer 4

Presented by buyer to coop board - financial qualifications, letter of employment, letters of reference, other requested materials.

Question 5

Bylaws

Answer 5

Building’s constitution.

Question 6

Common Areas

Answer 6

Land and improvements that are used by all residents and owned as tenants in common.

Question 7

Condominium

Answer 7

Property developed for co-ownership, with each owner having a separate interest in an individual unit, as well as undivided interest in common areas.

Question 8

Condominium Act

Answer 8

NY’s law governing establishment of condos.

Question 9

Condominium Declaration

Answer 9

Document filed for record when property is developed as a condominium - describes project in detail including drawings.

Question 10

Condop

Answer 10

A building with multiple condos - first unit is the coop residential units (considered to be one condo) and the second is professional and/or commercial. Coop residents purchase shares, but they are incorporated into one condo unit.

Question 11

Cooperative

Answer 11

Buildings owned by corporations with residents as shareholders.

Question 12

Cooperative Policy Statement #1 (CSP-1)

Answer 12

Application to test the market for new condo/coop development.

Question 13

Covenants, Conditions, and Restrictions (CC&Rs)

Answer 13

Condos - general plan of private restrictions. EX: front doors must be painted certain color, can’t install satellite dishes, etc.

Question 14

Flip Tax

Answer 14

Fee imposed by coop board on seller for transfer of ownership.

Question 15

Flipping

Answer 15

Purchasing and quickly reselling property for a property after fixing it up.

Question 16

Horizontal Property Acts

Answer 16

Make it possible to define ownership rights in condominium.

Question 17

House Rules

Answer 17

Rules of condo building.

Question 18

Letter of Intent

Answer 18

Between condo buyer and developer - agree to do business together. Usually non-binding, but can sometimes be binding or enforceable and include a sizable downpayment.

Question 19

Limited Common Areas

Answer 19

Common areas owned by all but used by one - balcony on one unit extending into air owned by all, individual unit’s parking spot in building garage.

Question 20

Maintenance Fees

Answer 20

Condo - Common Charges, HOA, Real Estate Taxes. Coop - Maintenance.

Question 21

Offering Plan

Answer 21

Offers detailed information regarding the condo or coop being developed and must be approved before construction. Includes floor plans, expenses, building materials, expenses, etc.

Question 22

Proprietary Lease

Answer 22

Lease in coops - gives residents exclusive, longer term lease with stock in the cooperative. Personal vs. real property.

Question 23

Recognition Agreement

Answer 23

Agreement between lender, coop, and shareholder recognizing rights of the lender financing the shareholder - gives lender opportunity to pay past-due maintenance to avoid foreclosure.

Question 24

Right of First Refusal

Answer 24

Condo - right to have first chance to buy or lease property if owner decides to sell or lease - rarely happens because requires that board has enough money to buy it back.

Question 25

Share Loan

Answer 25

Coop loan signifying buyer is purchasing shares in corporation rather than mortgage for ownership.

Question 26

Simultaneous Closing

Answer 26

Seller-financing technique where investor/seller creates private mortgage note and simultaneously closes with buyer on same day. HUD has regulations about predatory flipping with FHA.

Question 27

Sponsor

Answer 27

Developer that is part of the sale and development of condo/coop property.