How much do you know about NYC cooperative apartments? It is an entirely different type of ownership than either a house or a condominium apartment since it is NOT real property. Rather, it is personal property. It is an ownership interest (i.e. shares) in a cooperative corporation with a Proprietary Lease which permits occupancy of the apartment.
Unlike a house purchase, purchasers generally do not conduct a property inspection on an apartment. As a result, before entering into a contract of sale, attorneys perform due diligence on the cooperative corporation to identify issues and to inform the purchaser regarding specifics about the apartment and the cooperative corporation. The documents we review are the Offering Plan, Financial Statements, and Minutes of the meetings of the Board of Directors. Most attorneys also have a due diligence questionnaire that they send to the managing agent asking certain questions relating to the building and the unit (e.g. have there been any leaks).
The due diligence process generally takes from 3 days to 2 weeks with 5-10 days being an average time. During the due diligence period, the seller’s attorney will prepare a contract of sale with a rider and send it to the purchaser’s attorney. The purchaser’s attorney will then make comments on the contract and rider and add their own purchaser’s rider with protections for a purchaser including representations from the seller as to conditions regarding the unit (e.g. if the seller has made any complaints to the coop about conditions in the unit). The contract negotiation generally takes 2-5 days.
After the due diligence has been completed and the contract has been negotiated, the purchaser will sign the contract and return it to the seller’s attorney with a 10% Contract Deposit. During Covid, most of these deposits are being wired not sent by check as was previously done. Upon seller’s receipt of a signed contract and Contract Deposit, they will countersign the contract. At such point, you will be “Under Contract.”
Once you are Under Contract, if you are getting a cooperative loan (Note. it is not called a mortgage since a mortgage is only on real property), you will apply for the loan. Your attorney will order a cooperative lien search to make sure that there are no judgments or liens on the apartment or against the seller. You will also start working with your real estate agent to prepare the cooperative application. This application involves quite a large number of documents so be prepared and try to compile your income and asset documents early in the process! Once the loan has been approved, you will submit the cooperative application to the managing agent for approval by the cooperative board. This process can take anywhere from 3-6 weeks with average time of about a month. It will include an interview with a few members of the board, which is mostly being done virtually during Covid.
Once the loan is cleared and the coop approves your application, you will then be able to schedule a closing. The closing usually occurs 1-3 weeks after coop approval. During Covid, the scheduling is taking a little longer since the closings are either partially or fully virtual to minimize the number of people in the room. So, the days when we had 8-10 people around a closing table are gone for now. The whole purchase process can take anywhere from 45-90 days depending on if you are getting a loan; speed of the coop managing agent and board, and the seller’s housing situation. The average time is about 60 days. At the closing, after signing a lot of documents, you will receive the stock, lease and keys to your new apartment!
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