Last January, not even television psychic, Ms. Cleo, could have predicted the events that were set to unfold in 2008. With the unraveling of the economy that we’ve already heard quite a bit about and forecasts for a gloomy start to 2009, it’s as if we’re dealing with an economic Murphy’s Law. As a result, it is no surprise that most professionals in the industry have some concerns and trepidation looking forward. But the New Year is also a time to look back. A time to look at the hard facts, while moving forward and hoping for something better.
Well, as far as hard facts go, let’s just say that there is cause for concern.
Paying More with Less
“My concern is that with the continued downturn in the economy, there’s going to be issues which co-op boards… haven’t faced in a number of years,” says Eric M. Goidel, Esq., of Borah, Goldstein, Altschuler, Nahins & Goidel, PC, in Manhattan. “One is depressed sales and depressed sales prices.” Goidel predicts that depressed sales and sales prices “will lead potentially to an increase in the requests in buildings for the subletting of apartments, when shareholders realize they can’t get the money they want for their apartment. Many of them may elect to seek subletting as a way to tide them over temporarily.”
In addition to “a pick up in foreclosures of co-op apartments,” Goidel anticipates an increase in non-owner occupancy in buildings. “The other thing is, in buildings that haven’t fully converted, or substantially fully converted, I’m seeing that a number of sponsors now who were actively marketing apartments for sale have taken those apartments off the market and are renting their apartments too. And obviously when you’re dealing with sponsors or even some categories of investors, they don’t even need board approval for the rental of their units.”
Attorney Harriet M. Polinsky, also of Borah, Goldstein, Altschuler, Nahins & Goidel, PC, mentions her concern that the much-needed improvements and upgrades to buildings are going to fall by the wayside. “If there is a cash flow crunch, and other problems with cooperators, this may really make it very difficult for them to go ahead with these ambitious, but very needed plans for upgrading a building,” she says.