Home may be where the heart is, but these days, it’s also the source of enormous anxiety and concern for a great many co-op and condo owners. With the economy mired in recession and unemployment still hovering near the 10 percent mark, more homeowners than ever are falling behind on mortgage payments, maintenance fees and common charges. In turn, those situations are forcing many boards and managers into difficult decisions over how and whom to help within their co-op or condo communities.
The Scope of the Problem
Compared to the housing market in other areas of the country—like Florida, California or Michigan, to name some of the hardest-hit—the slump in New York is certainly not as deep, but problems still exist, and have grown as the economy has worsened over the last year or so.
“These are some very, very difficult economic times that people are going through and it’s feeding its way down to the condo market,” says attorney Marc H. Schneider of the law firm Schneider Mitola LLP, who works with a lot of properties in the Long Island area. There, he says, he has seen a wide range of condo communities that are facing problems, from communities with a very small percentage of foreclosures all the way up to buildings with as much as 15 percent of their units in trouble.
In general, condo building communities are facing a far rougher situation than co-ops. According to attorney Andrew P. Brucker of Manhattan-based Schechter & Brucker PC, although more individual co-op shareholders are facing financial difficulties now than in the past, “In my opinion, there is not a great increase,” he says. The reason? “Co-op boards are very tough when it comes to financials. So whereas a bank might accept a [prospective buyer's] application, it’s very possible that a co-op board might reject them. We have seen this many times. Therefore, we believe that the co-op shareholder population is actually financially stronger and more secure than the average person in the general population. We believe that is why there has not been a major increase in arrears in co-ops.”
That's in contrast to condos, Brucker says. “We have seen a definite increase in arrears in condos,” he says. “The reason for this is simple. In the typical condo, the board does not have to give consent. Although the board asks for financials, they typically cannot reject [a buyer] based upon poor finances.”