Sponsor Owned Apartments

When the building converted from rentals to whatever form of ownership it has, the developer kept some units. Sometimes it's because rent-stabilized tenants/seniors couldn't be thrown out -- sometimes it's because the developer thought the neighborhood was on the upswing, and that the units would be worth more if sold later.

Those are "sponsor" units.

They used to sell at a discount to market -- because they're often old and need in renovation -- but now they tend to sell at a premium, since they are exempt from the building's standard rules about board approval, and often, down payment.

ali r.
{downtown broker}

“no board approval” means that you will be exempt from financial and social interview by the board members.

In many cases downpayment go down to 10%, but more and more sponsors go by the building's standards about it.

Sometime you can buy unsold shares from the sponsor and keep unit as an investment property (vs. primary residence). That depends on the sponsor, building and has to be discussed with your real estate attorney.

elena
(broker)

As front_porch and barskaya said, the big advantages are no co-op board interview and lower down-payment requirement, BUT, that second benefit is minimized (if not eliminated) by the fact that lenders now want a minimum of 20% down anyway. Not long ago it was a big deal to be able to get in w/ only 10% down. Now, if the co-op demands 20%, there's no difference. Also, you may be responsible for hefty transfer taxes as you would be with a condo purchase. Assuming you are a desirable buyer with no issues that a co-op board would take exception to, the likely additional cost of a sponsor unit probably isn't worth it.

Though now that I think about it, if the sponsor sale also skirts reserve requirements and you don't have enough beyond 20% saved, this could help, though of course a healthy reserve is a good safety net regardless.

nice point tenemental -- I hadn't thought about the fact that it's not so relevant to get in with 10% down if you can't get a mortgage!

Still, a sponsor buy might make sense in an area like Sutton Place -- where many of the buildings require 40% cash. Even if you're stuck with, say, putting 20% or 25% down to make your mortgage lender happy, that's still easier than a stringent building's requirements.

As Elena said, you want to check and see if you can get exempt from the building's standards or not.

ali r.
{downtown broker}

And the buyer is usually responsible for the sponsor's legal fees, in addition to the transfer tax, both of which are paid by the seller in a typical resale. These terms, like price, can be negotiated - but the default position is "buyer pays".

Even though these are "No Board Approval" units, approval by the building's management company is usually required, meaning one still has to bear one's financial soul and be fairly well qualified.

Also, I have seen cases where the sponsor's minimum down payment requirement was HIGHER than the building's.

As a building moves from majority sponsor owned to majority tenant owned, do the individual apartments generally increase in value, or does it not make any difference?

I'm not an expert, but usually the apartments will increase in value because there are fewer underlying divergent agendas. Generally: owner, renters and sponsors have very different objectives for the building which can show in a bunch of different ways but mostly in the maintanance of the building. Owners want a nicer building and are usually willing to increase maint to get it. Generally, sponsors want as low maint as possible as do renters. This can cause tension and a weird standoffish culture in the building.

Hi, I'm considering to buy a sponsor apartment just because it looks nice and seems to be a better value than a condo for the same price. I would buy without mortgage and I would not mind closing costs like for a condo. But I would like to know if a sponsor unit will be treated like all other coop units once there's a new owner or if it keeps it's status. (meaning the new owner could rent it or sell it without board restrictions?) Because if not I guess a condo would be a better deal. Thanks for any advice.

pls note -- you need board approval to sell a sponsor apartment -- not to buy.

153 - once you have bought a sponsor Co-op apartment, you are subject to the same Board rules you would have been had it been a regular resale.

M and J, thanks for the advice, now I know I have o avoid sponsor apartments. higher closing costs for no benefits don't make much sense.

If the sponsor has a rent stabilized tenent in place, can the sponsor make changes to the apartment with or without tenet consent ? for example, putting carpeting down? its a coop building. I'm trying to figure out ways to reduce noise from the apartment above me.

marco--the tenant is required to carpet 80% of the livable floor space (bedrooms, DR, LR). This is the case no matter what type of apartment building you live in.

sounds great, but why would that be a requirement ?

bramstar, it's a myth that that's a legal requirement ... but it's often a requirement of leases, including proprietary leases ... and, I suspect, condo house rules.

marco_m, for the very reason that you're looking for.

that being said, I gues the owner could put in carpet regardless of what the tenent wants ?

Of course not.

" it's a myth that that's a legal requirement ... but it's often a requirement of leases, including proprietary leases ... and, I suspect, condo house rules."

Alan, So you say the 80% carpet rule is a common one for leases (rentals), proprietary leases (coops) and condos but you say it's a myth that it's a legal requirement? What are we missing in Manhattan? brownstones? public housing?

Marco:

I own sponsor coops. Even when my tenants are rent-stabilized, I and similarly situated
owners much comply with Coop House Rules regarding carpetting and noise.

Thw owner of your neighbor's unit is responsible for the cost of instaling a carpet if
one os required, not his/her/its tenant.

If the noise bothers you, complain to management. It's their duty to enforce House Rules
and lease terms.

I dont know what the house rules are. I am an owner as well as the newest memeber of the board so ill make a few call to see what I can do. If anything I may be coming up with new policies and procedures.

Thanks for all the info!!

TexaninNewYork:

I'm not one of those posters here who's all hat and no cattle. The requirement that buyers
pay real estate transfer taxes and seller legal fees when buying sponsor coops stems from
the initial terms of 1980's offering plans. It does not have to apply in this market. If
you buy from a sponsor you can demand standard sale terms re taxes and attorney's fees.

Coop sponsor units are generally known as "unsold shares" because of regulations issued in
1983 by the NYS Attorney General's office under the state's anti-fraud securities law, the
Martin Act, I believe at 22 NY Code Rules and Regulations section 18.3(w)(1) and (2).

If you or a member of your immediate family move into an Unsold Share that you have bought,
or buy it for occupancy, it becomes a "sold share" and the special rights granted holders of
unsold shares in the coop's proprietary lease lapse, meaning that you no longer possess them.

Marco:

One final point. We owners of rent-stabilized and rent-controlled coops are not allowed
to reduce the level of services that we provide our tenants. If your neighboring tenant
takes the position that hardwood floors are part of the package of services that her LL
is obligated to provide to her, DHCR might not allow the unit owner to install a carpet.

Best advice: try and get the tenant's consent to installation of a carpet if that is what
you want.

And be prepared to pay for it.

what if the owner feels that the floors are being damaged?

Psychotherapists are good at helping people with their feelings.

rb, I don't see how putting down carpeting could in any way be considered a reduction in services.

I'm sorry if my post earlier was not clear--as others have correctly clarified, most leases, whether they be for renters or tenant shareholders, require 80% carpeting in the unit. In face, I have never come across a lease (at least not here in NYC) that does not include that requirement.

Check your lease/proprietary lease. If it includes the 80% bylaw (and it will) you are completely within your rights to demand that appropriate floor covering be installed in your upstairs neighbor's apartment. And the neighbor is required to abide by that demand.

but of course its not what you or i think but what the tenant thinks. if the tenant doesn't want to voluntarily do something to reduce the noise, this all becomes a big messy issue. think for a moment of the practicality of deciding on the kind of carpet, where it goes, maintenance of it, etc. with a non cooperative tenant.

^^In fact, not in face.^^

bramster:

Many tenants prefer hardwood floors to carpeted ones. So of a LL has historically let his
tenant keep its hardwood loor without a carpet, the forced installation fo one, even at the
owner's expense, might be considered a reduction in services which, in turn, will entitled
the teant to some sort of rent abatement or, possibly, the right to compel removal of a carpet.

DHCR is in a better position to address that problem than me.

The tenant has no right to be a nuissance, intentionally or accidentally. Yes, you have the right to install the carpet. Yes, you will have to pay for the carpet and the installation and expect normal maintenance if there are holes, etc. that are created in the future.
Obviously, positioning this nicely and as a free benefit is your best route. Hopefully the tenant is not columbiacounty, who will be a nuissance regardless of right or wrong.

>>Many tenants prefer hardwood floors to carpeted ones<<

Tough. If the tenant is creating a noise problem the landlord will be forced to mitigate it. Carpeting hardwood floors does NOT constitute a decrease in services. No judge worth his or her salt would ever rule in favor of such a ridiculous argument.

By the way, no one is talking about installing wall-to-wall here. But in most leases in most NYC buildings it is required that sufficient (80%) floor space be covered with carpeting in order to prevent a noise problem to other tenants. If there are complaints and a tenant fails to comply the tenant will find himself in breach of his lease.

who is going to enforce this?

I just looked through the house rules of the condo I used to own, and there's no floor-covering requirement.

>I just looked through the house rules of the condo I used to own, and there's no floor-covering requirement.

Is that why you sold?

Looks like the carpeting matter has been discussed here:

http://streeteasy.com/nyc/talk/discussion/17818-80-carpet-rules

says here that most leases contain the 80% language. this could be interesting.

http://www.housingnyc.com/html/resources/faq/quality.html

once again, how will you enforce this?

with a long broom stick

Ill be able to hear it. Then if she breaks here lease we'll toss her a$$ out

good luck. enjoy your ownership experience. i'm sure your new neighbors will be all so happy to support you.

seems as if columbiacounty has some related experience. He encountered a broker who told him to put a window shade in his shower.:

columbiacounty
about 18 months ago
ignore this person
report abuse
http://streeteasy.com/nyc/talk/discussion/14059-98-riverside-drive
yes...that's the point. regular glass...the broker kind of looked at it, shrugged and (as i said) suggested a window shade. classic.

Bramster:

DHCR has the final word on what services are required. And unless its ruling is "clearly
irrational" it must be upheld by a court. And a shareholder cannot be compelled to comply
with a Coop carpet rule when DHCR will not let him.

marco--you seem to be having difficulty adjusting to life in your coop--your complaints, anger, threats have been steadily leaking out onto this board--seem the stress may not be worth the added expense of ownership--i hope you ate least got to paint your walls whatever color you like--di you clear that with the board?

rb--DHCR has its quirks, that's for certain, but there is simply no way even they would take such an argument seriously. In the off chance that they did happen to do so, no judge would uphold the decision.

Services include things like working elevators (where applicable), heat/hot water, working laundry facilities (again, where applicable), etc. If the floor were badly damaged, rendering the unit unfit for habitation, that would be a different story. Clearly not the case here.

Remember, there's also such a thing as peaceful enjoyment of one's home. If the upstairs neighbors are creating undue noise the downstairs tenant has every right to demand the problem be cured.

how long and how much money do you envision this process consuming?

Bramster:

1. if the apt were carpetted, removing the carpet would diminish LL services
2. why should the opposite not be true when many tenants rent precisely b/c there is no carpet
3. as to the right of quiet enjoyment, in a Coop the Corp. owes that to its shareholders
4. not one unit owner to another
5. and the covenant of quiet enjoyment concerns freedom from legal interference and suit, not noise
6. distburbing noise is a common law nuisance issue
7. and NY courts long ago sanctioned a great deal of noise as being okay
8. problem is the tenant owes no duty to her neighbor or the coop other than not be be a nuisance

That much said, since I also try and find a positive solution to all problems:

1. LL still owes duty to neighbor even if he cant install carpet
2. and coop board can still insist on compliance with House Rule noise requirement
3. so I would explore installing a new floor
4. older floors often make noise b/c wood has warped, underfloor has settled or is inadequate
5. a new floor wont diminish tenant services
6. and can probably be partially soundproofed
7. an offer by Marco or the Coop to pay 1/2 the cost of a new floor would be very generous and fair
8. and might induce LL to accept without a nasty fight
9. LL might also be willing to repay that 1/2 contribution when apt is sold

as i said earlier, if marco wants this fixed, he's going to have to pay for it. personally, i would rather put a new floor in my apartment not my upstairs neighbor.

rb, if the floors are replaced, the LL will be allowed to increase the rent based on the cost as it is a significant improvement to the property. why would marco have to pay a penny, if the LL will get his money back within 5 yrs?

note: from http://www.housingnyc.com/html/resources/dhcr/dhcr24.html

To qualify as an MCI, the improvement or installation must:

be depreciable pursuant to the Internal Revenue Code, other than for ordinary repairs;
be for the operation, preservation and maintenance of the building;
directly or indirectly benefit all tenants; and,
meet the requirements set forth in the useful life schedule contained in the applicable Rent Regulations.

it would seem that condition #3 clearly would not be met in this instance.

further:

For rent stabilized apartments, the rent increase collectible in any one year may not exceed 6% of the tenant's rent in NYC and 15% of the tenants rent outside NYC at the time the application was filed.

assuming a monthly rent of $1,000 (which is probably way high) max increase would be $720 per year. a new floor for $3,500?

ab11218:

1. under the circumstances, to my knowledge, only if done with tenant consent
2. the reason for my proposal: to avoid the fractious ego clashes common in Coops
3. for a glaring example, look at the Lapidus v. 1050 Tenants Corp. cases
4. two sets of attorney shareholders living in the same apartment line with the L's on top
5. two titanic fights over a leaking toilet and leaking air conditioner
6. involving liability for repairs running from under $1000 to maybe $3000
7. something like $2,000,000 spent determining liability for those repairs

Absolutely! ab11218's suggestion confused building-wide major capital improvements, which can be involuntary on the tenant's part, with an upgrade requested by the tenant, which this would not be ... so no fractional increase in rent.

rb345 is right here: upstairs tenant rented what he rented, and if landlord (for any reason) alters that, a reduction would be in order. I've even heard of DHCR/courts approving rent reductions for flooring repairs that were not done in a "workmanship-like manner": replacing rotting herringbone with new strip, for example. If LL were forced to soundproof, whether by carpeting or some other system, LL would have to eat it.

Downstairs neighbor should get earplugs or play circus marches to distract himself (Karl L. King station on Pandora works well).

so marco is shit out of luck.

No one is talking about 'flooring repairs' or installing wall-to-wall carpet or other permanent noise-proofing material. Putting down an area rug does not in any way constitute an 'alteration' to the apartment.

so...the plan is to tell the tenant that marco is putting in an area rug? are you kidding?

Egg cartons on the ceiling ... works like a charm, every time!

Installing the carpet is not a reduction of services.

The carpeting can be placed to ensure that the tenant is not a nuissance to other tenants. The rule, as long as it was not intended to single out this tenant in any way (by the way, when was in put in place?) will not be viewed as creating an unfair limitation or obligation on the tenant.

The owner (or the building/co-op) will have to pay for the carpeting. The owner will not be entitled to a rent increase based on a capital improvement.

oh jesus.

now you're judge fucking judy?

bramster:

Rent-stabilized tenants are not parties to Coop proprietary leases and cannot be
compelled to do anything mandated by those leases. Unit owner is in tough spot
if tenant will not consent to carpetting.

To be clear, is this a rent controlled tenant or a rent stabilized tenant. When it comes down to DHCR, and the courts, there's a big difference in what the tenant will be able to get away with. If a rent stabilized tenant, if the landlord has an interest in getting rid of the tenant, and the tenant refuses the carpeting, this may ultimately work out quite well for the landlord.

rb, not entirely true. While the stabilized tenants themselves are not parties to the proprietary leases, the sponsor/owner of the stabilized apartments is indeed responsible for upholding co-op by-laws with regards to units he owns.

All this said, it can indeed be difficult to enforce the rules if a stabilized tenant decides to be stubborn.

forty posts and we're back where we started--if the tenant doesn't want to cooperate its a mess.

Have you ever gotten along with anyone in your whole life? Were you a difficult birth and your mother kept reminding you?

everyone but you.

but there are so many of you.

so, so many.

why?

>everyone but you.
but there are so many of you.
so, so many.
why?

Really, everyone but me? Ok, affirmatively name half a dozen people here you get along with, and maybe those people can reciprocate and name you as someone they like. That should be easy to do, right? Half dozen. Just six.

Huntersburg:

Rent-stabilized tenants can be evicted for breaching highly material terms of their
leases, such as refusing to provide their LLs with a key to their apartments.

Refusal to install a carpet is not likely to be one of them. In addition, Real Pro-
perty Actions and Proceedings Law section 753(4) automatically stays all L&T court
decisions to provide time during which a tenant can "cure" his/her breach.

So a tenant sued for not consenting to a carpet installation who loses can avoid
eviction simply by letting the LL install.

according to the proprietary lease of the building, all lessee's and subtenants must obey house rules. House rule #16 explicitly states the requirement of 80% rugs, carpeting or equally effective noise reducing material.

If that's the case, you can compel them to put down the carpeting. The managing agent usually has the right to inspect if the carpeting is down. If there is none, the tenant or shareholder has a time period in which to install the carpet. The managing agent then has the right to inspect after this period to see if they have followed up. Shareholders are open to fines if they or their tenant do not comply.

Offer to pay for padding for under the carpet. Most likely whoever is forced to put the carpet won't be buying the thickest they can buy. Padding makes a big difference and is very inexpensive.

oh marco, not another conflict with the board--youve only been in the building a short while---you sure youre cut out for coop ownership??

Mortgage broker here and lenders are still financing up to 90%; in condos even up to 95%. The catch is you have to purchase mortgage insurance. But when the value of the property goes up so you loan to value is about 80%, you can cancel the mortgage insurance.

Marco:

1. Coop cant compel stabilized tenant to do anything because it has no contract with her
2. and if LL is barred from carpeting by DHCR a court wont enforce your House Rule #16
3. that's why I recommended getting the tenant's consent
4. and if that fails and LL cant carpet, work out a deal to put in a quieter wooden floor
5. dont let ego and a misplaced sense of fairness get in the way of your personal happiness

The landlord is not barred by the DHCR on this matter.

Lacking a carpet is a nuissance to the neighbors. The tenant can't intentionally or even accidentally be a nuissance to the neighbors.

>3. that's why I recommended getting the tenant's consent
Yes, always better to go a friendly route.

>Rent-stabilized tenants can be evicted for breaching highly material terms of their
leases, such as refusing to provide their LLs with a key to their apartments.
Totally different issue. The NYS Multiple Dwelling Law governs the key issue.

>Wbottom
about 10 hours ago
ignore this person
report abuse oh marco, not another conflict with the board--youve only been in the building a short while---you sure youre cut out for coop ownership??

Listen, Wtushy, first of all, I'm thrilled (as are all streeteasy parents) that you are not talking you and children and Barney videos and your various perversions. So good job on that, and I realize this is something you have to be mindful of every day, so keep it up.

And honestly, if attacking apartment owners helps you to make sure you are appropriate in the context of children, then I suppose we should overlook these repeated attacks on apartment owners. But I do have to wonder, why Wtushy, why do you so frequently have to attack apartment owners? More than a dozen times a day ... it makes marco's complaints about living in a coop seem almost irrelevant.

Anyway, tomorrow is another day. Stay away from the children.