Showing posts with label sponsor. Show all posts
Showing posts with label sponsor. Show all posts

Nov 12, 2013

Holders of Unsold Shares in a Coop

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In many coop offering plans there is a special class of shareholders called Holders of Unsold Shares who have rights and privileges not enjoyed by the ordinary tenant-shareholder. The more unsold shares there are in a co-op, the less clout the other tenant-shareholders have. If the coop has a majority of unsold shares it is difficult to obtain financing since the coop is less than 50% owner occupied.

Q: What are Unsold shares? What is a Holder of unsold shares?

A: "Unsold shares are any shares not subscribed to and fully paid for prior to closing. At or prior to closing, unsold shares must be acquired by the sponsor or financially responsible individuals produced by the sponsor. A holder of unsold shares is the sponsor or any individual designated to hold unsold shares by the sponsor. Such shares shall cease to be unsold shares when purchased by a purchaser for occupancy.

The key word in this definition is "designated". When a sponsor holds on to unsold shares after the closing he or she may, thereafter, transfer those shares to others, not necessarily to "holders of unsold shares". If he or she designates the grantee of these shares as a "holder of unsold shares" then that individual or entity" becomes a holder of unsold shares.
 
Holders of Unsold Shares are not required to submit their prospective purchasers to the board for its approval, nor are they bound by the board's sublet restrictions. Holders of Unsold Shares are allowed to sublet their units at market rates in perpetuity. They're also exempt from paying sublet fees, alteration fees, transfer fees and flip taxes which may be imposed on the typical tenant-shareholder.

These are shares of stock in a cooperative housing corporation which are allocated to apartments that have never been purchased for residential use. Once the apartment is acquired as a residence, the shares allocated to it cease to be Unsold Shares and its owner is not entitled to Holder of Unsold Shares status.
 
I recently listed two sponsor apartments in a coop in Morningside Heights. Both were purchased by an investor that will retain the sponsor rights and privileges as long as the purchaser (holder of unsold shares) designated by sponsor never occupies the apartment.

The New York State Attorney General has taken the position that an Owner of Unsold Shares does not necessarily qualify as a Holder of Unsold Shares, and that to become a Holder of Unsold Shares, an Owner of Unsold shares must meet the following five requirements:

1. Obtain a designation as Holder of Unsold Shares from the sponsor. Subsequent transferees of the sponsor can not obtain the designation from their immediate seller, it must be procured from the original sponsor. Under the regulations, the sponsor may only designate financially responsible persons as Holders.

2. Obtain a written guarantee of payment by the sponsor to the co-op of all financial obligations of the Holder of Unsold Shares. This provision of financial security is the quid pro quo for allowing an investor to enjoy the privileges and immunities described above indefinitely.

3. Adhere to the escrow and trust fund provisions of the General Business Law.

4. Register with the Department of State as a broker-dealer.

 5. File regular updating amendments to the Offering Plan.


Aug 21, 2012

Manhattan New Developments | FAQ

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WHAT IS CONSIDERED NEW RESIDENTIAL DEVELOPMENT?
In New York, this is a residential offering that is completely new to the market, and must be approved by state and local governments. It includes both ground-up construction and the conversion of an existing structure, such as an office building or rental property.

 WHAT IS A ‘SPONSOR’?
The legal entity that owns the new development being offered—considered “the seller.”

WHAT IS AN ‘OFFERING PLAN’?
A comprehensive disclosure document provided by the Sponsor and approved by the Office of the Attorney General of the State of New York (“Attorney General”) that describes the property’s offering.

WHAT IS AN ‘OFFERING PLAN AMENDMENT’?
A modification to the Offering Plan that is filed with and accepted by the Attorney General. Amendments are issued over time as material changes are made to the Offering Plan.

WHAT IS A ‘PURCHASE AGREEMENT’?
A legal agreement between a Purchaser and Sponsor detailing the conditions of the sale of property, including price and terms.

HOW IS AN OFFER MADE?
Offers are made in writing and submitted to the development’s onsite salesperson by the buyer or their real estate agent.

HOW DOES AN ACCEPTED OFFER GO INTO CONTRACT?
Once an offer is accepted by the Sponsor, the onsite salesperson requests contact information for the purchaser. The Sponsor’s attorney draws up the Purchase Agreement. The Purchase Agreement and Offering Plan are then sent to the purchaser’s attorney for review. Once both parties have signed the Purchase Agreement and the Sponsor receives a down payment, the residence is considered “in contract.”

HOW IS A DOWN PAYMENT MADE IN NEW DEVELOPMENT?
Typically, this is a percentage of the purchase price. Often, it is paid in the form of a certified check or wired into an escrow account set up by the Sponsor’s attorney.

WHAT IS THE DIFFERENCE BETWEEN COMMON CHARGES AND MAINTENANCE FEES?
Common Charges are monthly dues in condominiums, the most common form of new development. Maintenance Fees pertain to cooperatives.

FOR CONDOMINIUM BUYERS, WHAT ITEMS ARE COVERED BY MONTHLY COMMON CHARGES?
Common Charges are the monthly charges allocated to each residence and paid to the condominium in order to cover the pro-rata share of the condominium operating expenses. This does not include the unit owner’s real estate taxes which are billed separately to each owner. As the cost of operating the building changes over time, Common Charges are also subject to change.

New Development Listings

DISCLAIMER: PLEASE NOTE THAT THIS IS NOT A LEGAL OR TAX DOCUMENT OR OPINION. THE INFORMATION CONTAINED HEREIN IS GENERALIZED FOR MANY SITES; BUYERS SHOULD CONSULT THEIR TAX ADVISORS, LEGAL COUNSEL AND THE COMPLETE TERMS AND CONDITIONS OF THE OFFERING PLAN FOR THE PROJECT BEFORE PURCHASING A PROPERTY.

Apr 8, 2007

New Development Resales: A Real Good Deal

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If you're looking for new construction you might save thousands of dollars by buying a resale in a brand new building. When a buyer purchases a condo or coop in a new development directly from the sponsor(developer)the buyer is usually required to pay New York City and New York State transfer tax.

When buying from a sponsor in a coop,(unsold shares) the transfer tax is not only the amount of the sale price but the portion of the underlying mortgage allocated to the shares associated with the unit being purchased.

In resales seller's pay transfer taxes. NYC transfer tax is 1.425% of sale price above $500,000.

New buildings usually start selling pre-construction about 2 years before the the building is ready for occupancy and the units close. Often the best lines sell out early. By the time the building opens there are usually a few resales. Either units never lived in purchased by flippers or a unit that might be for sale because of personal reasons.

If you missed out on a building you like during pre-construction sales buying one of the first resales in a new development has some advantages. In addition to not paying transfer taxes and other possible sponsor related closing costs you can have more instant gratification. You get to physically see the apartment, the fixures and the view in person. In pre construction you buy off a floor plan and brochures.You don't always get to see the building or the apartment you are purchasing. You don't have to tie up your 10%-15% deposit for a year or more.

Interested in New construction consider the advantages of a resale. If you would like to receive new construction listings by email including resales click here.
 
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