CoopAndCondo.com - Addressing the realities of Residential Real Estate

From the Law Firm of Gitter & Lehrer PLLC

I Know a Guy...

       
I Know a Guy...

Unauthorized Alterations Can Get Costly 

New Yorkers pride themselves on knowing someone who can get something done at a reduced cost, on an expedited basis or without anyone knowing about it. Consider it street cred or bragging rights. That being said, one area where “knowing a guy” can get you into a lot of trouble financially and psychologically, is undertaking a material alteration in a co-op or condo without obtaining the consent of the co-op or condo Board and without making the necessary filings with the New York City Department of Buildings ("DOB"). 

In more innocent cases, an apartment owner might think everything was done correctly, but finds out the contractor or architect did not finish the sign off process.Although it’s not as easy as it was years ago to undertake alterations in an apartment without obtaining the required consents, it still happens, particularly in smaller buildings where the scrutiny on such things is minimal or non-existent. Sometimes an apartment owner will obtain the approvals, but will have the contractor go beyond what was approved and filed for. For many years, this approach by the fearless, but irresponsible apartment owner did not have great risk. But today, attorneys are actively checking the current configuration of an apartment compared with what the offering plan described.

How might the issue arise?  

Let’s say that someone is selling a one bedroom apartment that is listed by the broker as having a bath and a half. That is, a bathroom and a powder room. The offering plan shows only one bath. A check of the online filings with DOB shows no application or approval for the addition of the half bath. At some point, either the current seller or a previous owner (unbeknownst to the current seller), added a powder room without the appropriate DOB filings, and perhaps, without the approval of the co-op or condo Board. Now it is possible that consent of the co-op or condo was obtained, but the owner’s contractor or architect failed to make the required DOB filings or failed to complete the process. As I have experienced many times, the reality of this omission often does not come up until the seller is about to go into contract on the sale of the apartment. Assuming that the unauthorized alteration does not kill the deal, the seller is then put in the position of having to “legalize” the alteration, by making the filings with DOB that should have been made when the alteration was first undertaken. That process will require the seller to hire an architect and contractor at significant cost and to incur penalties for the late filing of the proposed alteration with DOB. In the nightmare situation, the alteration that was not filed for cannot be legalized for various technical reasons. That will require the seller to return the apartment to the configuration or condition that existed before the alteration was made. That does not happen very often, but it can.  

What to Look Out For...  

The most common example of either the failure to file or failure to complete the process is the combination of two apartments. Sometimes the combination is actually filed for by the owner’s contractor, but the sign off process with DOB is never completed. In most cases, the DOB process can be completed, but it can take weeks and often months to get the closure needed by DOB, evidenced by the issuance of a “letter of completion”.

A classic nudge, nudge, wink, wink, alteration that is often not filed for is the installation of a washing machine and dryer. Assuming that the building's governing documents allow for installation of a washer machine and dryer (which is not always the case), legalizing such an installation should be possible by the filing and sign off of a certain type of plumbing permit.

Apartment owners also have a nasty habit of removing walls or installing walls without consent. The detective works starts when the apartment is listed as a two bedroom, one bath. It does not take Sherlock Holmes to figure out something is wrong when the offering plan lists the apartment as a one bedroom, one bath. Usually, removing a wall, provided it is not a structural wall, will not create insurmountable problems for legalization. Adding a wall is another story. There are very specific (and often changing) DOB requirements for light and ventilation in an apartment. Rooms that do not have the minimum required light and air specifications will not be approved by DOB. If such is the case, the apartment owner will be forced to return the apartment to its original configuration, which may materially change the value of the apartment.  

Another situation that requires investigation is a listing that promotes the apartment as being “completely renovated” or “updated”. The purchaser’s attorney usually will ask the client what condition the apartment is in. When the client says, “oh, the seller did a gut renovation”, the attorney’s next step will be to check the DOB website for filings. In most cases today, the selling apartment owner jumped through the necessary hoops, but there may still be an open permit that will need to be signed off before the closing. It’s a hassle for the seller, but something that can be accomplished assuming the closing is 60 or 90 days away. On the other hand, if nothing was filed with DOB, it can be a major undertaking to make things right that might take months to complete. The most egregious and complicated situations arise with unauthorized alterations undertaken 20, 30 or 40 years ago. The DOB revises requirements often and what was permitted 30 years ago may not fly today. Those situations do not have a one size fits all solution. 

Unexpected Liability  

Liability for an unauthorized alteration can arise unexpectedly. Most co-op and condo buildings require a purchaser to execute an "assumption document" by which the purchaser assumes liability for alterations made by their seller, and in some cases, for all alterations made in the apartment. Often, the assumption document is not presented to the purchaser by the transfer agent until the day of the closing. That assumption means that the purchaser will be responsible to correct any problems with the prior alteration should the alteration be called into question in the future. One solution is to ask the seller for an indemnity that survives closing in the event that the co-op or condo does require such an assumption from the purchaser. Sellers will resist giving an indemnity, but depending upon market conditions, it’s always worth asking for and you might just get it.  

Residential Reality: Kick the Tires... 

Most apartment owners in New York are not wise guys trying to pull a fast one. Often, an apartment owner believes they have done everything required only to find out, someone let them down. A party expecting to list an apartment in the near future is well advised to check that all renovations were approved by the co-op or condo and completed as required by applicable law. Buyers, on the other hand, should make sure that all alterations in the apartment being considered have been approved, filed for and signed off by DOB.Renovating an apartment in New York City is no easy task. Making sure that all required approvals and sign offs were obtained can save a lot of grief and cost down the road.

 

 

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I don’t smoke, but the smell of smoke is wafting into my apartment from my neighbor. Is there anything that can be done to remedy this condition?

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I’m selling my co-op tomorrow and my bank attorney has not yet received the stock certificate and proprietary lease from my bank. Will the closing have to be adjourned?

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The seller has indicated that there was a leak in the bathroom from the apartment above that has been repaired in all respects? Can I rely on seller’s representation to that effect in the contact?

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Can I insist on closing on the date stated in the contract?

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The commitment letter included a condition that my loan was subject to a “second review” by the investor to whom the loan will be sold. Has my commitment letter been issued?

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Can I purchase my co-op in the name of a trust?

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Can I allow the seller to remain in possession after closing?

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There’s a repair needed in the apartment that the Seller promises to remedy after the closing. Is that a good idea?

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Do I care who the bank attorneys are?

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Do I have to go to the closing?

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One of the conditions in my loan commitment states that the monthly maintenance cannot increase by more than five percent? Is that a problem?

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Can I have a roommate after I purchase my co-op apartment?

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Can I undertake renovations before the Closing?

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Do I need a home owner’s insurance policy for my apartment at the time of my closing?

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Should I let the broker do the walk through?

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Once I get a loan commitment, is my loan approved?

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When it comes to purchasing an apartment, what exactly is due diligence?

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Do I have to let the maintenance people in to fix a building system?

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Does my dog have to be interviewed by the Board?

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Is buying an apartment in a small building a good idea or a bad idea?

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Can I fudge on my numbers in my financial package to the Board?

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Should I use a mortgage broker or should I go direct to a bank?

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Should I have the apartment inspected before I sign the contract?

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Do I Really Have to Give the Board My Tax Returns?

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I am purchasing an apartment with extensive landscaping on the terrace. Can the co-op or condo make me remove landscaping that was existing at the time of my purchase?

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I have an opportunity to buy a garage space, but the sponsor is calling the arrangement a “license” rather than a “purchase”. Does that matter?

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We are considering an apartment that will require us to move the bathroom to another location in the apartment. Is such a move possible?

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The seller’s bank can’t locate the stock and lease for the co-op closing. Can we still close?

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The broker told me that I can adjourn the closing for 30 days? Is that correct?

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The Offering Plan for my condo indicates that the apartment has a “lot line” window. Is that a problem?

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My dog bit someone in the lobby and I have been notified that if it happens again, my dog will have to go. Does the Board have the power to restrict me from having a pet?

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There is an unobstructed view from the apartment I am considering, but there is a vacant lot directly in front of that side of the building. Is that reason for concern?

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The Managing Agent called and it looks like my finances will not be sufficient to get Board approval. Is there anything I can do?

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The managing agent has had our application to purchase a cooperative apartment for three weeks and nothing has happened. Is there anything we can do to move things forward?

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We are considering an apartment in a co-op where the sponsor still owns units. Is that a problem?

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The seller’s apartment presently has a storage unit. Does the storage unit transfer with the apartment?

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We’re closing in three weeks, but our lease is up next week. Can we move in before the closing?

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I just did the walk through on the purchase of a sponsor unit and we have an extensive punch list. Will the punch list be completed by the time of closing?

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I’m buying an apartment from a sponsor and the Offering Plan requires me to pay the sponsor’s transfer taxes and attorneys fees. Do I have to?

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The purchase price of my apartment is over $1,000,000.00. Is the transaction subject to the “mansion tax"?

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I’m selling my apartment, but I’m not a resident of New York State. Are there any special closing costs?

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We did the walk through and the apartment was filthy. The contract required the apartment to be “broom clean”. Can we complain at the closing?

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I have to sell my apartment in order to afford the new one I’d like to buy. Can the contract be contingent on the sale of my existing apartment?

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I’m a famous person (no, I really am) and I really don’t want my financial information given to eight strangers on a co-op Board. Is there a way to avoid that?

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I’m the executor of the estate of a deceased shareholder. Do I have to go to the closing?

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I just graduated law school and have a job with a large law firm. I have a significant salary, but no liquidity or significant assets. Will I be able to buy a co-op?

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The listing indicates that the apartment has “roof rights”. How can I be sure?

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When buying a condo, is it worth the time and effort to get an assignment of the seller’s mortgage?

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The Seller removed an expensive chandelier right before Closing. Is that permitted?

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My husband and I found an apartment we love, but there’s a bidding war. Should we participate?

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We love the apartment, but the building has bad financials. Should we go ahead?

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My closing is in December, but the lease for my apartment does not expire until the following March. What do I do with my lease?

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We are buying a condo, but we have a delayed closing as the seller has a tenant in place for the next six months. We will be able to retain our loan commitment for an extended period of time?

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Should my husband and I take title as tenants by the entirety, tenants in common or as joint tenants?

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Q

When a gay couple buys the shares of a cooperative or buys a condominium apartment, what is the best way to hold title?

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I have not been able to make my co-op mortgage payment for the past three months. If the bank declares my loan in default, how long will it take before the bank forecloses on my apartment?

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A co-op owner asks: I have found that maintenance is usually higher in coops than in condos because of the contribution by the shareholders to the building's underlying mortgage payments. In condos, the unit owners only pay for real estate taxes and common charges for common areas. Will the monthly maintenance be reduced after the underlying mortgage has been fully amortized?

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Can a corporation or other business entity own the shares of a cooperative apartment?

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I’m buying an apartment in a building designated as a “landmark.” Should I be concerned?

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I am buying a co-op that needs major renovations. The super has offered to do the work at a significant discount. Is that a good idea?

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We just submitted the Board package and we realize that we neglected to disclose a lawsuit against my husband’s company, in which my husband is named as a defendant? The lawsuit is covered by insurance and my husband is indemnified from liability by his employer. Should we notify the managing agent and amend the purchase application?

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We are negotiating the contract and we just found out that there is a substantial assessment that will go into effect the month that we close on the purchase. Should the assessment be deducted from the purchase price at closing?

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The bank attorney was two hours late to the closing. Was that my attorney’s fault?

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I’m buying a cooperative apartment in Manhattan, but I move out to the Hamptons from June to the end of September each year. Will I be able to sublet the apartment each year when I’m away?

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I just got the purchase application package and it's twenty pages long. Should my broker be helping me with organizing the required documents?

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It’s the day before the closing and I just found out that the maintenance for the apartment is higher than the maintenance stated in the contract. Is that grounds to terminate the contract?

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The financials for the condo are more than a year out of date and there is a delay issuing the new financials. Should I be concerned?

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The contract requires “official bank funds” in the form of certified or official bank checks. Can I bring “official" checks from my brokerage account?

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My parents want to buy me an apartment while I’m in graduate school in Manhattan. Will a co-op allow me to purchase the apartment, if my parents are co-owners?

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I obtained sole ownership of my condo in my divorce, but the deed for the apartment is still in both of our names. Will my ex-spouse’s cooperation be required when I’m ready to sell the apartment?

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I just found out I have to pay a fee to have my mortgage recorded. Is that right?

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I am buying an apartment in a small building and I just found out that the elevator is being renovated and will be out of service for three months. Do I have to close if the elevators will not be operational on the closing date?

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My husband and I own a co-op and we would like to transfer the shares to an irrevocable trust that we recently created for estate planning purposes. Will our cooperative allow us to make that transfer?

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The seller is a foreign citizen and does not have a social security number. Does that prevent the seller from selling the apartment?

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An “assessment” was imposed by the co-op Board after the contract was signed. Is payment of the assessment the seller’s responsibility?

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There is a leak in my apartment and the Resident Manager is not being responsive. Should I call the Board president?

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I just bought an apartment and I am only refinishing the floors and repainting. Do I need the consent of the Board before I get started?

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The co-op I’m interested in is pet friendly and I have a dog. Is there any chance the Board could approve my application without approving my pet?

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We purchased our apartment in January, but our first mortgage payment is not due until March 1st. Why isn't the first payment due February 1st?

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I’m buying an apartment from a sponsor and the contract does not provide for a “mortgage contingency”. Is that a provision that I can negotiate into the contract?

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I am buying an apartment from a sponsor and the contract provides for the buyer to pay the sponsor’s transfer taxes and legal fees? Is that normal?

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I'm buying a condo and my attorney just ordered the "title report". What's a title report?

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There is a leak in my apartment and the Resident Manager is not being responsive. Should I call the Board president?

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My boyfriend and I are interested in buying our first apartment in a new construction condominium. Our mortgage broker tells us we should qualify for a 90% loan, but it will be a close call for the bank. The sponsor wants us to sign a “no contingency” contract. Is that a good idea?

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We are considering a condo purchase in a new development that is only 25 percent sold. There is a bank that has approved the project and will make the loan, but should we be concerned about the number of units that the sponsor still has to sell?

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We are buying an apartment that has been extensively renovated. Among other things, the size of the master bath was significantly increased. Can we rely on a representation in the contract that all required approvals were obtained from both the Cooperative Corporation and from the New York City Department of Buildings?

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Q

We received a draft of the contract of sale for the cooperative apartment we are buying and our social security numbers are on the front page! Our attorney told us that we will have to provide our identification numbers to the managing agent for a credit check as a part of the Board package, so it’s not a big deal. Do we have to list our socials on the contract?

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Q

The listing stated that the apartment was 1,100 square feet, but the appraisal measured the apartment at 900 square feet. Can we cancel the contract and get our money back?

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Q

I'm about to pay off my co-op loan. What evidence will I have from the bank that the loan has actually been paid off?

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Q

I am considering an apartment in a new construction condominium. There is park under development by New York City that will greatly enhance the value of the condominium when it’s completed. Although the sponsor’s salesperson indicated that the first phase of the park will be completed in the next year or so, the Offering Plan contains a “Special Risk” that states that the sponsor gives no assurance as to when, if ever, the park will be completed. Who and what should I believe?

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Q

We are in negotiations to purchase a co-op apartment on the Upper East Side. Our lawyer reviewed the minutes and discovered that the building has a bedbug infestation. Should we go forward with our purchase?

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My purchase application was approved by the co-op Board, but it is conditioned upon my providing a maintenance deposit and guaranty by my parents. Do I have to comply with the conditions?

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Q

At my closing, I had to reimburse the Seller for his New York State “STAR” rebate that appeared on the maintenance statement for the month following the Closing. What exactly is the STAR rebate and will I be able to obtain the rebate as well?

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I'm selling my co-op next month and my attorney aked me to "freeze" the line of credit I have with my bank. What exactly do I have to do?

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I just found out that the seller will be unable to close for an additional two weeks. As a result, I will have to extend my rate lock, at a cost of $1,200.00. Is the seller obligated to reimburse this cost?

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Q

I am buying a new construction condo and the Offering Plan is over 400 pages. Do I need to read the entire Offering Plan?

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Q

We ran across a co-op that has a few “sponsor owned” apartments for sale. Is there any advantage in buying one of the remaining sponsor apartments?

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Q

I am about to make an offer on an apartment, but I have not been provided with the current financial statements for the co-op. Am I entitled to review the financials before I make my offer?

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Q

We are selling our apartment to our neighbor, but our neighbor can’t afford to purchase our apartment unless she sells her apartment. Her lawyer wants the contract to provide that the purchase of our apartment is contingent upon the sale of her apartment. Our lawyer is advising us against including a provision that makes the transaction contingent on the sale of the buyer’s apartment. Should we go along with the contingency?

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Q

We are selling our co-op and the buyer is not obtaining a mortgage in connection with the purchase. The contract required the Board package to be submitted within 10 business days after the fully-executed contract was returned to the buyer. The buyer is two weeks late in submitting the package. Is the buyer in default?

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Q

I’m selling my condo and I have not been able to pay my common charges for the past six months (I lost my job). I have a buyer for the apartment, but the Board of Managers will not release the Waiver of the Right of First Refusal, unless I pay the outstanding balance of the common charges. I’m between a rock and a hard place, as I don’t have the money. What should I do?

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Q

I am combining two adjacent apartments that I own and I want the co-op to issue one stock certificate for both apartments. There is an outstanding UCC lien against one of the apartments. The other apartment is owned free of any liens. Can the co-op object to the combination?

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Q

My attorney asked me to contact the managing agent to verify the maintenance and assessment information that's disclosed in the contract for the apartment I intend to purchase. Isn't that my attorney's job?

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Our application to purchase a co-op was turned down by the Board without an interview. Although our attorney asked the managing agent to disclose the reasons for the Board’s decision, none were given. Can the Board just turn our application down without any explanation?

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Q

My bank issued a loan commitment, but then withdrew its underwriting because private mortgage insurance was not available. Will I have a problem canceling the contract and getting my deposit back?

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Q

The seller has a storage bin, but the contract indicates that the apartment does not come with a storage bin. If I buy the apartment, can I be sure that a storage bin be avaialable?

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Q

I’ve been asked to serve on the Board of my co-op. Could I be held liable if the co-op is a party to a law suit?

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I am buying a co-op in Manhattan. The managing agent is located in Brooklyn and refuses to send a closing representative to the attorney’s office for the buyer or seller located in Manhattan. Will everyone have to go to Brooklyn for the closing?

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We are purchasing a condo that was occupied by a tenant at the time the contract was executed. We just did the walk through and there is damage to a portion of the floor that was hidden by the tenant’s furniture. Are we entitled to a repair credit at Closing?

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A loan commitment was issued, but the bank requested an explanation for a $14.00 missed credit card payment that occurred nine years ago. Could the bank withdraw its commitment as a result of this missed payment?

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I'm selling my co-op, which I own with my mother and father. Is it okay to have the closing checks made out to the three of us?

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A leaking pipe inside the wall of my co-op was recently replaced. The following month, my maintenance account was charged $1,000.00 on the theory that the pipe only serviced my apartment. Am I responsible for this repair?

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A condo buyer has a mortgage contingency, but the closing will not take place for six months as the seller has a tenant in the apartment. When should the purchaser apply for financing?

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We submitted our Board package a month ago, but the Board has not scheduled an interview or asked for any additional information. To make matters worse, the managing agent won’t give us any indication as to what’s going on. Is there anything we can do?

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Q

My co-op contract included the seller’s flat screen, but the bank underwriter required that it be removed from the contract as it was “impacting” loan to value. Can the bank do that?

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Q

I am buying an apartment in a small co-op that is self managed. How does the bank obtain the required “co-op questionnaire” in order to complete its underwriting?

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Q

I'm selling my apartment. When can I cancel my insurance coverage?

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My condo has requested access to my apartment in order to make repairs to the plumbing lines located in the ceiling. Am I obligated to give the super access to make the repairs?

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