We've always thought that once you finally buy a NYC apartment, you're kind of set. No more worrying about endless rent hikes that could drive you out of the city altogether. But as the New York Times recently reported, you're not 100 percent secure even if you own—in this case, a co-op.
Sometimes, especially in small buildings, co-op owners can find themselves being forced to rent the apartment they once owned (usually at market rate). They may even find themselves being evicted from said apartment. It's a true-life real estate nightmare.
Attorney Marc Luxemburg, president and one of the founders of Council of New York Cooperatives & Condominiums, told us this is a "recent phenomenon," and says it's a result of developers not finding enough space on which to develop.
"With the ever-increasing demand for residential real estate, record high land prices and few available development sites, small co-ops are emerging as one of the few remaining creative development options," the Times reports.
Here's how it works, according to the paper: "Because of the structure of most co-ops, once developers or investors acquire a 'super-majority' of apartments in a building, they can maneuver to evict any holdouts."
Oftentimes, that super-majority is 75 percent, but that number can differ based on a building's bylaws. Almost all co-ops have a point at which time they can be terminated.
In most cases, shareholders in these situations retain their shares, which means once the developer sells the apartment, they'll have a payout. But that doesn't mean they'll necessary be able to stay in their apartments, even if they're willing to pay the rent.
While this isn't something that happens often, there are certain buildings in bigger danger, says Robert Braverman of Braverman Greenspun. "Are there a number of units that are owned by senior citizens who may be considering a move or, on the other end, young families that have outgrown their apartment and may need to sell?" Those could be easy targets for picking off.
Asked whether there can be signs that a building might be headed this way (a red flag for would-be buyers), Braverman says to look out for multiple non-combined units that are owned by the same person or entity. And, he says, "in the course of performing due diligence in connection with a purchase, inquiries can be made."
"The buyer's attorney has to do some investigating," adds Luxemburg. He suggests looking at whether or not the building has sold its air rights, and whether the buildings surrounding it have. Unsold air rights can be a developer's dream. Also, take a look at zoning and landmark status to see whether the building is developable, Luxemburg says.
If a developer is looking to dissolve a co-op, "shareholders can sign a legal agreement not to sell and to work in concert," says Luxemburg.
Check out the proprietary lease and co-op by-laws to find out the rules, but if you want to stall the developers, understand that lawsuits—and stalling—will cost you. "You'll pay for that in legal fees," Luxemburg says.