Selling A Coop In New York

Selling a cooperative apartment (which everyone refers to as a “coop”) in New York is a bit different compared to selling a single family home or a condominium mostly because a coop is not actually real property. Rather, when you own a coop, you own shares in a corporation that owns the building.

If you’re thinking about selling or looking for an experienced coop real estate attorney to help you through the selling process, The Donaldson Law Firm put together the following article to illustrate the basic steps that are involved.

Step 1. Getting Into Contract

Once you have an accepted offer with a buyer, your realtor will issue what’s called a memo of sale or dealsheet and he/she will send that to your real estate attorney and the attorney for the buyer.

The dealsheet sets out all the material terms: address, unit/apartment number, purchase price, downpayment, what’s included in the sale, what’s excluded from the sale, the name of the coop corporation (usually), and a target closing date.

Your lawyer will use that information to draft a Contract of Sale which he/she will then email to the buyer’s attorney.

Unlike condominiums and single family homes, there usually isn’t that much negotiation over the contract terms for a coop because (a) the contract itself is rather comprehensive, and (b) there’s no need for contingencies regarding HVAC equipment, certificates of occupancy, surveys, etc., because they are unnecessary when the premises involve a coop apartment.

Despite the lack of significant negotiation between the real estate lawyers, it’s still important to retain an experienced attorney when it comes to the contract because the language itself is quite dense in a legal sense and, as the seller, you want to avoid the risk of giving away any important rights or assuming any unnecessary obligations.

When the contract is complete, the buyer will sign and deliver the downpayment to the seller’s attorney which he/she will hold in escrow pending closing.

Once the downpayment is received, the seller will sign the contract (electronic signatures are acceptable) which is then returned to the buyer’s attorney.

Step 2. Sit Back While The Buyer Submits Their Board and Loan Applications

Once the contract is complete, the buyer is obligated to get the board approval and loan application processes started. Of course, if the offer includes cash only, then there’s no loan application to make, which leaves the buyer and the board to do their thing.

However, if the buyer is applying for financing, he/she must first obtain a loan commitment letter which the board will require to be included with the board application.

Step 3. Board Approval

Of course, a buyer doesn’t always get approved. However, once a board does approve the buyer’s application, the buyer’s attorney will order a lien and judgment search. It’s sort of like a title report, but different in the sense that it focuses on liens recorded against the coop. It also checks for judgments against the parties.

One of the primary purposes of the lien and judgment search is to ensure that any liens recorded against the shares are cleared before ownership is transferred from seller to buyer. Similar to a mortgage on a single family home, such liens must be paid at closing before ownership can transfer from you as seller to the buyer.

That said, if you took out a loan when you purchased the coop and there’s a balance still due, you’ll need to contact your lender to request a payoff letter as well as information as to filing a lien termination statement at closing.

Coop Real Estate Attorneys - The Donaldson Law Firm, PLLC

Step 4. Dealing with Lost Stock Certificates and Proprietary Leases

If you’re still paying off the loan on your coop, then you can skip this section because your lender will have your original stock certificate and proprietary lease in their possession. (They don’t return them to owners until the loan is paid in full.)

However, in the event you don’t have a loan (or if you’re selling on behalf of another person) but you can’t find the originals, then the law firm for the coop is likely going to require what’s called an Eagle 9 policy which is insurance that protects the buyer from possible defects associated with their ownership of the coop post-closing.

If you’re required to obtain an Eagle 9 policy, the good new is that the premium is a one-time, nominal cost – about 0.5% of the purchase price. To illustrate, if you’re in contract to sell your coop for $400,000, the Eagle 9 premium would be near $1,955. And the premium is usually paid from the downpayment your attorney will be holding in escrow.

Moreover, if the original stock certificate and proprietary lease are lost, the coop’s law firm will require that you (a) sign an affidavit stating they were lost, and (b) pay a fee of about $250.

Step 5. Final Loan Approval

Once the borrower has dotted all of the I’s and crossed all the T’s associated with the loan, they will issue what’s called a “clear to close,” meaning they’re all but ready to write a check and fund the loan which allows the buyer to finalize the sale.

Once the transaction is cleared to close, your real estate attorney will prepare for the closing itself.

First, the closing is put on the calendar. 99 times out of 100 it will occur at the coop’s law firm which is almost always located in the same county as the coop itself. Once the lender is cleared to close, the closing will usually occur in the following 10-15 days.

Second, your real estate attorney will prepare what are called closing adjustments: purchase price plus credits owed to you as seller but less credits owed to the buyer (e.g., downpayment, etc.)

Your real estate attorney will also compile a spreadsheet showing what costs he/she will pay using the downpayment that’s been held in escrow. These costs typically include his/her legal fee, real estate broker commissions, NYS transfer tax, Eagle 9 policy premium, recording fees, coop law firm/transfer agent fees, maintenance arrears (if any), etc. The balance is then paid to you at closing from your attorney’s escrow account.

Step 6. The Closing

At the closing, your real estate attorney will be seated at your side, guiding you through the sea of papers situated on the table. However, what’s most important is that you receive certified checks in exchange for transferring ownership of the coop to the buyer. You’ll have to sign a few documents as part of the process and hand over the keys to the unit but what’s most important is that you leave that conference room with the money in your pocket.

And once you have the sale proceeds, that’s it! The closing process has reached an end.

Of course, if we attempted to explain every circumstance that can arise when selling a coop on a single page online, it would be a book rather than an article. However, the above should give you a good sense of what happens when selling a coop in New York. (And, yes, there are coops even in Westchester.)

If you’re selling a coop and would like more information about how we help our clients navigate the process, please give us a ring or send us an email.