Q & A
January 9, 2011
On the Dotted Line, One More Time
Q I recently got a letter from a lawyer representing a lender who now owns the share-loan on my co-op apartment. The letter states that the original loan documents — including the loan agreement and the assignment of the proprietary lease — are missing and that the lawyer has been hired to obtain “duplicate original counterparts” of these documents and have me sign them. Do I have to do so?
A Ross M. Levine, a Manhattan real estate lawyer, says that most share-loan agreements contain a provision allowing the original lender to assign the loan to a third party, and that the borrower has an obligation to help bring this about. “It is not unreasonable for the new lender to require you to re-sign documents pertaining to your existing loan,” Mr. Levine said. He noted that if the lender required the co-op to provide and execute any missing documents, charges for those services should be paid by either the former or current lender, not the co-op or the shareholder.
How Rule Changes Affect Condo Tenants
Q I am a rent-stabilized tenant and did not buy my apartment when the building converted to a condominium. Do rules made by the condo board apply to tenants like me? I would assume that new rules would be unenforceable if they required me to do or not do something addressed by my original lease. What happens if I do not follow the rules?
A “A rent-stabilized tenant is required to comply with the terms of her lease, including the house rules that are often attached at the end,” said David Ng, a Manhattan lawyer who represents tenants. “And the standard rent-stabilized lease contains a provision that implicitly allows the landlord to amend or add to the house rules.” So, Mr. Ng said, if the condominium’s board of managers changes the building’s house rules, it is often possible for the owner of a rented unit to adjust the rules applying to that unit so they conform. But that does not mean a new rule can contravene any specific provision of the lease. For example, if the lease grants a rent-stabilized tenant the right to have a dog, a new house rule prohibiting all residents from having dogs would be unenforceable against the stabilized tenant.
Determining Co-op ‘Tax Basis’
Q I heard that co-op owners get to increase their “tax basis” for their share of payments that reduce the principal on the building’s mortgage. What does this mean?
A Martin B. Miller, a Manhattan tax lawyer, said that the “tax basis” of a property is the amount used to calculate gain or loss when the property is sold. In the simplest case, the tax basis would be the purchase price, which would be deducted from the sale price to arrive at the gain on the sale of the property for tax purposes. Mr. Miller says the typical proprietary lease provides that the part of a shareholder’s monthly maintenance used to pay down the building’s mortgage is treated, for tax purposes, as a contribution to the capital of the corporation. Each year, the co-op’s accountant calculates how much of the building’s mortgage has been paid down and then apportions that figure on a per-share basis among shareholders. When a shareholder sells, the cumulative amount of his capital contributions is added to his tax basis, reducing the gain.
Email questions to realestateqa@nytimes.com. Answers can be given only through the column.
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