How much do I have to pay to convert my unit to a condo?
To convert your unit to a condo you must redeem your shares, pay your proportionate share of the underlying mortgage and all closing costs relating to the conversion. Your portion of the underlying mortgage are based on your outstanding shares. Closing costs will include the following: legal fees, non refundable working capital (normally two months of condo maintenance fees), title insurance premiums, loan fees and expenses and escrow requirements. In addition, you must payoff your share loan, if you have one, because your share lender has a security interest in your shares, which will be cancelled. Consult your own bank/share lender for the figures that you will need at closing. In most cases, the redemption process can be structured to be "CASH FREE" to the shareholder. Your ROA HUTTON advisor will assist shareholders in securing condominium mortgages at favorable terms to finance their conversion. For most resident shareholders, monthly housing costs will remain the same or in many cases be reduced.
What type of loan can I get?
Working with a mortgage company, we will seek project approval by Fannie Mae. Assuming that we receive project approval, a full range of competitive mortgages will be available such as adjustable rate loans, fixed rate loans and cash out mortgages. There is no obligation for you to obtain a loan made through us; you may obtain your own financing independently.
What if I don’t want a mortgage?
You do not have to apply for a mortgage. You may pay your pro rata share of the cooperative’s debt and the closing costs in cash.
Is there any difference in the way the building will be managed and maintained as a condo versus co-op?
The building's management will not be any different as a condominium. Under the master deed, the condominium association will be responsible for the same common areas that are currently being maintained by the co-op. You as a co-op shareholder or as a condominium owner will still be responsible for the maintenance of your individual unit. Staffing and security and other services will remain identical to those provided currently as a co-op.
How long will the conversion take?
Generally, a conversion takes place anywhere between six and nine months.
What happens at the meeting of shareholders and thereafter?
The Board of Directors will schedule a Special Meeting by the shareholders to vote on whether or not to dissolve the cooperative and convert to a condominium form of ownership. This vote does not guarantee that the Board will dissolve the corporation, but allows them to pursue that objective. If, at any time after the vote, the Board determines that the conversion option is no longer in the best interests of the Shareholders, then the Board will not dissolve the cooperative. Prior to the vote you will have the opportunity to speak to us in order to answer any remaining questions that you may have.
Assuming that the Shareholders vote to dissolve the cooperative, we will be scheduling appointments in order for you to make a loan application, if necessary. At the same time, we will begin work on establishing the new condominium.
What happens if I do not redeem, and most, if not all other shareholders do?
Provided that you continue to pay your monthly cooperative maintenance, you will have no disruption in your quality of life in the building that you enjoy today. Those who do redeem will simply own condos outright rather than shares in a cooperative of corporation that owns individual condominium units, which will be occupied under your existing proprietary lease.
What happens if I don’t want to convert?
If the required number of Shareholders of the cooperative vote in favor of dissolution, the Board will proceed with the dissolution. At the time of conversion, each shareholder will exchange his or her shares in the cooperative corporation for a deed to its former apartment now a Condominium unit. The condominium unit will be encumbered by the owner’s corresponding pro rata share of the underlying blanket mortgage, if not paid off in cash.
A failure to satisfy the debt and costs, through a pay-off or a financing, will cause the Shareholder to be in default under the bylaws and proprietary lease and allow the cooperative to exercise all rights available. Under the terms set out above, not participating will not excuse you from your financial obligations to the cooperative or to the condominium association under the replacement mortgage encumbering your unit. If you fail to make any of the required monthly payments, you will be subject to legal remedies of the cooperative and condominium association, including possible foreclosure on your unit. After a short period of time, to be determined by your Board of Directors (but usually no more than 2 years), your proprietary lease will be terminated, your stock will be canceled, and the holder of your replacement mortgage may foreclose.
Why would I want to convert to a condominium?
In general, the value and marketability of a condominium unit is greater than that of a cooperative. Shareholders will "own" their condominium units. Condominium units are easily transferred and financing is generally more available. Increased transferability makes units more marketable, and thus more valuable. Public understanding of condominiums and the availability of financing makes condominiums a better choice in many real estate markets. Your property values are anticipated to rise and it is expected that your property will be more marketable as a condominium unit than as a cooperative apartment. The value of your real estate will rise reflecting the increased value of your unit.
After I convert, what am I responsible for and what are my rights?
Once you become a condominium unit owner, unlike a cooperative shareholder you will not be responsible for any portion of the tax deficiencies created by non-payment of maintenance fees by your fellow shareholders. As a cooperative owner you are and have been in the past contributing to the cooperative's losses resulting from non-payment of maintenance fees and abandonment by shareholders particularly with respect to the mortgage payments and real estate taxes. As condominium owners, everyone will be responsible for their own real estate taxes and mortgage payments. However, maintenance fees will be collected under a common form of ownership, which will require that all unit owners make their monthly payments to the condominium to ensure that all cash requirements are met on a timely basis. Fortunately unpaid maintenance fees are an immediate lien on the title and deed of the unit and therefore and in most cases is recoverable through legal action or at subsequent closing of the condominium unit.
Your rights as a condominium owner will be very similar to those of a cooperative owner, however, they will be slightly enhanced with less restrictions on renting your unit, on the ability to finance any portion of your ownership and to conduct your own real estate tax appeals independent of your fellow unit owners. However there may be valid reasons to combine such efforts due to the economies of scale and the strength in unity by all condominium owners in pursuing a common goal.