Building Policies – Why They Matter
You’ve found a great apartment in a lovely building that’s in a perfect location. Awesome! But that’s not quite enough to move full steam ahead with making an offer. You need to learn more about the building’s policies, since all buildings – both co-ops and condos – have rules in place. These rules will not only have an impact on your day to day life. They also impact the resale value of your property since many of them will be of great significance to prospective buyers when it’s time for you to sell.
What are the particular topics you want to be on the lookout for? Although this list definitely isn’t exhaustive, here are several of the big ones:
If you’re a prospective buyer of a co-op, it’s pretty easy to understand why this would be important – you need to know the purchase requirements so that you can figure out if you have a solid chance of getting approved by the co-op board. But purchasing requirements are also important to sellers – the more restrictive the requirements, the more limited your potential pool of buyers will be when it’s time to sell your apartment. This isn’t necessarily a bad thing, especially if you really love other aspects of the building. But it’s important to keep in mind that it just may take a bit longer to find the right buyer for your apartment down the line.
This is probably one of the more obvious ones, especially if you currently have a pet. But it’s not enough to know if pets are allowed – you need to know the specific parameters. Are cats allowed, but not dogs? If dogs are allowed, are there any size or breed restrictions? Is there a restriction on the number of pets per apartment? What about other animals? Are you allowed to have a pet parakeet?
You may not think that a sublet policy is all that important to you, especially if you’re planning to stay in a place long term. But sometimes, unexpected things may happen in your life which require an immediate move, and a quick sale just may not be feasible or prudent under the circumstances (especially if it’s a difficult sales market). That’s where subletting comes in.
As discussed in a previous post, owners in a condo have greater freedom when it comes to renting out an apartment versus a co-op. But both building types will have a specific application process along with fees, and you should know about it. For co-ops in particular, it’s important to know about 1) any residency requirements and 2) how many years total that you can rent during the course of your ownership. For example, a common sublet policy is that you have to live in the apartment for 2 to 3 years, and then you are permitted to sublet for 1 to 2 years consecutively, provided that board approval is given each year.
Policies regarding installations and renovations are particularly important for re-sale value – if prospective buyers know that they can do things like installing a washer/dryer or adding a second bedroom, then that will increase the value of the apartment in their eyes. Also, be sure to have your attorney carefully review the building’s alteration agreement.
Knowing the flip tax is important for both sellers and buyers (note: it’s not an actual “tax,” but rather a fee), since it will affect your bottom line when it comes time to sell your apartment. For buyers, it’s also good to know about it because some buildings actually require the buyer to pay a portion of the flip tax. Sellers should check with their managing agent to see if any changes in the flip tax policy are pending. You don’t want to get caught off guard at the last minute with an unexpected expense at the closing table, so find out about it in advance.
So how do you go about finding out this information? Easy – just ask your agent to find out for you! And of course, if you don’t have an agent, feel free to reach out to me. I’m always happy to help!