When I represent a client who is purchasing a co-op or condo apartment, it is important to look into the finances of the Co-operative or Condominium. A co-op or condo owner does not just own their own apartment. The owner owns a part of the cooperative or the condominium. The financial health of the cooperative or condominium has a direct effect on the apartment owner. Whether the building’s mortgage is due to be re-financed or a real estate tax abatement is about to expire are factors that would have an effect on the common charges or maintenance the owner is obligated to pay.
Similarly, if the capital reserve fund is inadequate to pay for a planned building wide repair and improvement project, there would probably be assessments imposed against each of the owners; the assessments would, of course, drive up the costs of ownership and adversely affect the value of the apartment.
This type of inquiry, called “due diligence” is important for the would-be purchaser so that the risks of ownership are understood and evaluated before the purchase is completed.
Kevin R. McConnell