- Kevin O'Sullivan
The First Step in Closing Your Co-op Transaction: Scheduling
In an earlier blog, we mentioned that common refrain: "It's just a simple co-op purchase." Phrased another, perhaps more accurate way, it's "the secured acquisition of the shares of a cooperative corporation and the concurrent assumptions of a proprietary lease". On second thought, that sounds too sophisticated and too expensive. We'd rather go back to living in our parents' place! Relax! An experienced, knowledgeable attorney will be able to translate the second sentence into the first sentence and bring you from contract to closing in an efficient, mostly painless, manner.
In this entry, we're going to start where all stories start: at the end. We're going to focus on the closing schedule and explain the basis of the symptomatic frustration commonly associated with the process.
Regardless of the value of the transaction, cooperative transactions can require more attorney time than other residential transactions simply because of the large number of parties involves. First time purchasers are often surprised to learn that the (1) Board of Directors of the cooperative, (2) the managing agent, (3) cooperative attorney, (4) lender's counsel and (5) seller's bank (commonly calls the "payoff bank") all have significant roles in the acquisition. Keep in mind that these are parties in addition to (6) the seller, (7) the real estate broker, (8) mortgage broker and (9) seller's attorney! When considering the roster of parties involved (and realizing that there are as many as NINE parties essential to the deal), it's understandable that the process can be frustrating. Coordinating nine of anything is challenging- let alone the busy schedules of professionals.
Before we delve into the specific individual requirements of each party (we'll do that in future blogs), let's start with a general understanding that each of the parties has their own interests to protect. In broad terms, the cooperative's Board of Directors is responsible to its shareholders. A such, they want to make sure that the buyer meets their specifications as a financially and personally upstanding member. The Managing Agent is hired by the Board of Directors. Their job is to insure compliance with the Board's internal processes (and make sure they remain hired by the Board of Directors), for that they coordinate with the Coop attorney (who is also hired by the Board of Directors). The coop attorney actually attends the closing, prepares and oversees execution of the legal instruments relating to your interest in the cooperative corporation.
For most people, the purchase will be financed by a bank through a mortgage broker. The bank will also retain counsel to prepare and facilitate execution of the security instruments signed at closing in exchange for the loan. Similarly, the seller (who obtained a loan to purchase the unit that the buyer is purchasing) will also have a bank present-the payoff bank, who will be responsible for insuring that the old loan is paid off.
In just that brief outlines of the various interests and roles played in a "simple" coop purchase, it's easy to see how the scheduling process can become a time-consuming morass. In order to alleviate the frustration cause by the scheduling process, we regularly review the closing requirements with each party in advance and maintain constant communication with each party in order to coordinate clearance in an orderly manner. By facilitating communication and coordinating approval, we reduce the risk of a "surprise" requirement (which will delay closing).
Please feel free to contact us by phone or email (firstname.lastname@example.org) if you would like us to represent you in the sale or purchase of a cooperative unit or any other real estate transaction. We're here to help.