Down To The Wire - Rent Control Laws Expire Next Saturday (section 8, foreclose)
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What is interesting about co-ops is even if a bank (or anyone else) gets ahold of the shares, board does *NOT* have to allow whoever holds said shares to automatically get the apartment. This is one reason banks and others are loathe to give loans on co-ops. If debtor defaults getting at the actual property may be difficult to impossible, especially if board won't cooperate.
You see those estate sale listings in newspapers for co-op shares all the time. These can be from foreclosures, deaths with no legal next of kin, etc.... But just because someone purchases those shares the board does *NOT* have to let them get the apartment. Board can (and likely will) insist on same vetting process as anyone else seeking to get into their building.
One of the huge reasons for the boom in condos is that they are easily financed (you can get a mortgage for any portion of buying price, and or the entire amount), and also easily sold compared to co-ops. Only real weapon a condo board has in cases of foreclosure or sale is right of first refusal. That is they must meet the price or stand aside.
When the stuff hit fan during past fiscal/credit/economic crisis many NYC condo buildings were left with a good number of owners who defaulted on financing, and thus units were being foreclosed upon. Co-op units , especially the old white glove buildings with very strict vetting/financing rules largely held their value. OTOH many condo buildings saw theirs plummet. Since that time many condo buildings have tightened things up.
If there is a mortgage on the co-op they are senior to anyone else in line so technically all personal mortgages are junior debt and in second place if the building defaults on its loans ,so that is why banks do not like co-op loans for the most part ....dealing with the boards can also be a negative.. besides that ,the Bank is also junior to the maintenance being paid .
If the maintenance is not paid the co-op has to notify the shareholders bank ..the bank has the ability to make the maintenance payments and foreclose .if they don’t make the payments ,the co-op gets first dibs ...they can have the court dispose of the shareholder ,sell the apartment and anything left goes to the bank towards the outstanding mortgage ..
If the apartment is owned by the sponsor , which we are , then any original stabilized tenants can not get the boot if the co-op takes our shares.. they are protected no matter who takes over our apartments
Last edited by mathjak107; 06-14-2019 at 02:37 PM..
but with this new law passing, maybe some of the regulated buildings are worthless when the operating expense is higher than the rent collected. So even banks who get hold it after the foreclosure will just abandon this property. what happened to those tenants
Quote:
Originally Posted by BugsyPal
Landlords don't foreclose on their own properties, banks, lenders or whoever else provided financing. Even then it has no effect on rent regulated tenants. If the bank, investor or whoever is successful in their foreclosure proceedings they become new owner of property but that includes taking on all rent regulated tenants. Leases are just transferred from previous owner to new; it has happened before plenty of times.
Savings and Loan crisis of 1980's, Lehman Brothers going bankrupt, etc... all involved real estate loans and when places went belly up person or persons and or investors/corporations go around looking for deals.
Truth to tell since the S&L crisis and other events afterwards banks have been very conservative and or cautious with RE lending. Much of the money flowing into market for past decade or so has come from investors or raised on foreign bond markets. A bank might get involved at some point when risk has diminished, but just giving out loans to any phisher who asks is totally over.
Loan to own however is a different story, and isn't totally unheard of still; that is banks, investors or whoever giving a LL or someone looking to buy property money even though they know things won't work out. Then all they have to do is sit back and wait...
but with this new law passing, maybe some of the regulated buildings are worthless when the operating expense is higher than the rent collected. So even banks who get hold it after the foreclosure will just abandon this property. what happened to those tenants
There is no such things as "worthless" NYC real estate. Rent rolls for certain buildings may decrease as result of these new laws, but they still are bringing in revenue.
Basically what has happened is state has rolled things back 30 years, removing all the various things democrats have never liked that GOP in Albany pushed through regardless. More to the point they made RS laws permanent so things are unlikely ever to change in future.
That being said LL's will just have to ask the fathers, grandfathers or anyone else who owned back in the 1970's through 1990's how they made their money. What you most certainly are going to see is things go back to way they were back then; LL's simply won't put money into their properties and city will start to look busted all over again. Small landlords are going to get hit hard, and thus you'll likely see many of them get out of the business, selling to large real estate companies and putting even more property in hands of the few.
If and or when things get really bad, just as in past even democrats will see sense. Remember it was because of busted areas creating low property values (which in turn lowers state and city tax revenue) that things like 421-a came about. That and Albany got religion and began chipping away at RS.
but with this new law passing, maybe some of the regulated buildings are worthless when the operating expense is higher than the rent collected. So even banks who get hold it after the foreclosure will just abandon this property. what happened to those tenants
There are provisions in place for landlords to raise rents if they are not profitable.. it involves a ton of documentation and does not apply to co-ops with original stabilized apartments.. they are called hardship increases
Who May File?
Section I General Information
You may apply if you own a partially or completely rent stabilized building and your operating expenses are equal to or greater than 95% of the gross income. In addition, all of the following must be met:
1. The owner (or an entity related to the owner) acquired the building at least 36 months before the date of application; and 2. The building has not received a Rent Stabilization Hardship Rent Increase within 36 months of the date of application; and 3. The owner's equity in the property is greater than five percent (5%) of the value of the property.
The property must be properly registered with DHCR under the Omnibus Housing Act of 1983. If the property is located outside of New York City, a current Property Maintenance and Operation Cost Survey Schedule must be on file with DHCR.
B. WhatisanAlternativeHardshipRentIncrease?
A building subject to rent stabilization is eligible for a rent increase if the property's allowable expenses are equal to or more than 95% of its income.
There are provisions in place for landlords to raise rents if they are not profitable.. it involves a ton of documentation and does not apply to co-ops with original stabilized apartments.. they are called hardship increases
Who May File?
Section I General Information
You may apply if you own a partially or completely rent stabilized building and your operating expenses are equal to or greater than 95% of the gross income. In addition, all of the following must be met:
1. The owner (or an entity related to the owner) acquired the building at least 36 months before the date of application; and 2. The building has not received a Rent Stabilization Hardship Rent Increase within 36 months of the date of application; and 3. The owner's equity in the property is greater than five percent (5%) of the value of the property.
The property must be properly registered with DHCR under the Omnibus Housing Act of 1983. If the property is located outside of New York City, a current Property Maintenance and Operation Cost Survey Schedule must be on file with DHCR.
B. WhatisanAlternativeHardshipRentIncrease?
A building subject to rent stabilization is eligible for a rent increase if the property's allowable expenses are equal to or more than 95% of its income.
Much like demolition eviction state throws that above bone in so RS laws can stand up in court against any USC takings clause legal action. OTOH just because it's there, doesn't mean things are easy nor certain to get.
It takes lots of paperwork but we know landlords who did get the increases granted.. it does not apply in our case since it does not cover co-op apartments that are stabilized
Generally a bank won't issue a loan on a coop unless the board agrees up front to allow the bank to take possession of the apartment in case of a foreclosure. As board president, I've signed a few of those.
One of the reasons condos are now more popular is that they can be bought by non-resident investors and rented out at will. A lot of coops don't allow that. We don't. We allow rentals buy on a tightly controlled basis, and with significant fees.
Quote:
Originally Posted by BugsyPal
What is interesting about co-ops is even if a bank (or anyone else) gets ahold of the shares, board does *NOT* have to allow whoever holds said shares to automatically get the apartment. This is one reason banks and others are loathe to give loans on co-ops. If debtor defaults getting at the actual property may be difficult to impossible, especially if board won't cooperate.
You see those estate sale listings in newspapers for co-op shares all the time. These can be from foreclosures, deaths with no legal next of kin, etc.... But just because someone purchases those shares the board does *NOT* have to let them get the apartment. Board can (and likely will) insist on same vetting process as anyone else seeking to get into their building.
One of the huge reasons for the boom in condos is that they are easily financed (you can get a mortgage for any portion of buying price, and or the entire amount), and also easily sold compared to co-ops. Only real weapon a condo board has in cases of foreclosure or sale is right of first refusal. That is they must meet the price or stand aside.
When the stuff hit fan during past fiscal/credit/economic crisis many NYC condo buildings were left with a good number of owners who defaulted on financing, and thus units were being foreclosed upon. Co-op units , especially the old white glove buildings with very strict vetting/financing rules largely held their value. OTOH many condo buildings saw theirs plummet. Since that time many condo buildings have tightened things up.
Generally a bank won't issue a loan on a coop unless the board agrees up front to allow the bank to take possession of the apartment in case of a foreclosure. As board president, I've signed a few of those.
One of the reasons condos are now more popular is that they can be bought by non-resident investors and rented out at will. A lot of coops don't allow that. We don't. We allow rentals buy on a tightly controlled basis, and with significant fees.
As they rightfully shouldn't.
Purpose of buying into a co-operative is that one knows one's neighbors, the building is just that a cooperative form of living. This cannot happen when you have people renting out units instead of actually living there themselves.
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Rd
