First off: I hate the term "condo-op" or "condop" or anything of the like. It's a co-op that own's a condominium. There. Now that that is out of the way... Is anyone familiar with what would happen/is necessary for a co-op to go "condo-op"? i.e. sell off only part of it's building/asset as a condo and be left as a co-op that owns the remaining condo? Can the existing corporation and leases remain... [more]
First off: I hate the term "condo-op" or "condop" or anything of the like. It's a co-op that own's a condominium. There.
Now that that is out of the way... Is anyone familiar with what would happen/is necessary for a co-op to go "condo-op"? i.e. sell off only part of it's building/asset as a condo and be left as a co-op that owns the remaining condo? Can the existing corporation and leases remain through this process? Does the corporation need to be dissolved and a new one created to own the condo unit? .
I am skeptical that such a process can be undertaken without terminating all of the leases, liquidating the asset, and then creating a new corporation to own the remaining bit. Sounds like if you're doing all that you might as well just go full on condo.
Thoughts are very much appreciated.
I know I know I know.. I need to consult a lawyer....
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Response by INTBuyer
over 4 years ago
Posts: 150
Member since: Apr 2013
“Own’s” = “owns.” Not even sure why auto-correct would suggest such a change!
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Response by front_porch
over 4 years ago
Posts: 5316
Member since: Mar 2008
Actually, technically, the true condops that I've seen are condominiums -- the retail space is one condo, and the residential space is another condo that is then co-op'd. So the condo unit already exists -- there's already been an offering plan that has run through the AG, for instance.
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Response by INTBuyer
over 4 years ago
Posts: 150
Member since: Apr 2013
Thanks, FP. You describe a different scenario than I am asking after however. My inquiry is regarding an existing coop that owns an entire building but then for some reason wishes the split the bldg into two condominums, then sell one and keep the other
How to collapse a coop: google "convert coop to condo". Far easier said than done.
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Response by INTBuyer
over 4 years ago
Posts: 150
Member since: Apr 2013
@George. So is your opinion that the existing corporation cannot survive thorough the transaction and therefore must be dissolved?
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Response by Aaron2
over 4 years ago
Posts: 1698
Member since: Mar 2012
@INTBuyer: What is the economic or other advantage you're trying to achieve (and who is going to get it)? (i.e., "for some reason"). On the most superficial level, converting to a condo and splitting off and selling the non-desired ownership interests would structurally accomplish what you're looking for, but why one would bother is beyond me.
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Response by INTBuyer
over 4 years ago
Posts: 150
Member since: Apr 2013
@Aaron2. I'd like to not get in the weeds of why one would even pursue this change in ownership structure but would rather focus on whether it is possible to do so without obtaining shareholder permission and by keeping the same co-operative corporation intact throughout the procedure. I'm having trouble believing that this is possible without either (a) dissolving the coop and then creating condos or (b) obtaining a super-majority of shareholders to vote to change to apportion off their shared asset and somehow purchase back the residential condo. Both involve obtaining shareholder permission AND paying off the underlying mortgage.
However, unless the coop is somehow gaining more than 20% of it's income from a commercial use, then it makes the most sense to just stay a co-op and apportion shares to the space (can you do that?). Then there runs the risk that the commercial owner holds too many shares...
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Response by George
over 4 years ago
Posts: 1327
Member since: Jul 2017
Advice is worth what you pay for it. Maybe worth engaging a professional to assess your specific situation.
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Response by Aaron2
over 4 years ago
Posts: 1698
Member since: Mar 2012
@INTBuyer: "to just stay a co-op and apportion shares to the space". Yes: If the co-op owns a commercial space then they either have already apportioned shares to it, or shares can be created and then sold (similar to the way that people buy part of a hallway for their own user). In my co-op building the commercial space was assigned shares, and sold off (a long time ago). Yes, the owner has a concentration of shares (but less than 15%), and I believe they have a different proprietary lease which governs their use of the space and maintenance of some elements (e.g., sidewalks on their side of the building). The plus is that the co-op retains significant control over the owner's use of the space, and they're paying maintenance, not rent (used to be important for the 80/20 rule). The downside is that we'll always have a an owner's rep on the board, but this doesn't seem to have been a problem (owner is a very big pension fund).
Depending on how much space is at stake, the number of shares created may be so great that shareholder approval is required (i.e., they're too dilutive of current owners). You should consider engaging a professional to explore the pros & cons of various configurations.
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Response by truthskr10
over 4 years ago
Posts: 4088
Member since: Jul 2009
Both (a) and (b) will require (b) and Ill go one further.
Not only will you have to pay off the underlying mortgage for the building but each individual unit will have to as well, and probably all of them do it on the same day.
THere are several tax issues that will come up as well. The co-op is likely a C corp which will get taxed, then if something ending up back in shareholder hands, they'll be taxed again personally.
Actually it would be a great idea for NYS to come up with a sweetheart conversion deal for co-ops to go to condo.
Owners of co-ops who do want it will love it for the increased value it will give their unit as a condo instead of co-op. The city should like it as it will get rid of more inventory of buildings with the dreaded prejudiced co-op board and will have property taxes that are higher and appreciate faster.
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“Own’s” = “owns.” Not even sure why auto-correct would suggest such a change!
Actually, technically, the true condops that I've seen are condominiums -- the retail space is one condo, and the residential space is another condo that is then co-op'd. So the condo unit already exists -- there's already been an offering plan that has run through the AG, for instance.
Thanks, FP. You describe a different scenario than I am asking after however. My inquiry is regarding an existing coop that owns an entire building but then for some reason wishes the split the bldg into two condominums, then sell one and keep the other
Definition of a condop: https://www.nytimes.com/2007/05/20/realestate/20cside.html
How to collapse a coop: google "convert coop to condo". Far easier said than done.
@George. So is your opinion that the existing corporation cannot survive thorough the transaction and therefore must be dissolved?
@INTBuyer: What is the economic or other advantage you're trying to achieve (and who is going to get it)? (i.e., "for some reason"). On the most superficial level, converting to a condo and splitting off and selling the non-desired ownership interests would structurally accomplish what you're looking for, but why one would bother is beyond me.
@Aaron2. I'd like to not get in the weeds of why one would even pursue this change in ownership structure but would rather focus on whether it is possible to do so without obtaining shareholder permission and by keeping the same co-operative corporation intact throughout the procedure. I'm having trouble believing that this is possible without either (a) dissolving the coop and then creating condos or (b) obtaining a super-majority of shareholders to vote to change to apportion off their shared asset and somehow purchase back the residential condo. Both involve obtaining shareholder permission AND paying off the underlying mortgage.
This article states that it is possible.
https://www.nytimes.com/1998/03/01/realestate/your-home-condop-part-co-op-part-condo.html
However, unless the coop is somehow gaining more than 20% of it's income from a commercial use, then it makes the most sense to just stay a co-op and apportion shares to the space (can you do that?). Then there runs the risk that the commercial owner holds too many shares...
Advice is worth what you pay for it. Maybe worth engaging a professional to assess your specific situation.
@INTBuyer: "to just stay a co-op and apportion shares to the space". Yes: If the co-op owns a commercial space then they either have already apportioned shares to it, or shares can be created and then sold (similar to the way that people buy part of a hallway for their own user). In my co-op building the commercial space was assigned shares, and sold off (a long time ago). Yes, the owner has a concentration of shares (but less than 15%), and I believe they have a different proprietary lease which governs their use of the space and maintenance of some elements (e.g., sidewalks on their side of the building). The plus is that the co-op retains significant control over the owner's use of the space, and they're paying maintenance, not rent (used to be important for the 80/20 rule). The downside is that we'll always have a an owner's rep on the board, but this doesn't seem to have been a problem (owner is a very big pension fund).
Depending on how much space is at stake, the number of shares created may be so great that shareholder approval is required (i.e., they're too dilutive of current owners). You should consider engaging a professional to explore the pros & cons of various configurations.
Both (a) and (b) will require (b) and Ill go one further.
Not only will you have to pay off the underlying mortgage for the building but each individual unit will have to as well, and probably all of them do it on the same day.
THere are several tax issues that will come up as well. The co-op is likely a C corp which will get taxed, then if something ending up back in shareholder hands, they'll be taxed again personally.
Actually it would be a great idea for NYS to come up with a sweetheart conversion deal for co-ops to go to condo.
Owners of co-ops who do want it will love it for the increased value it will give their unit as a condo instead of co-op. The city should like it as it will get rid of more inventory of buildings with the dreaded prejudiced co-op board and will have property taxes that are higher and appreciate faster.