Saturday, July 16, 2016

REBNY Legal Line Question of the Week: Square Footage Disclosure in Co-ops and Condominiums

QUESTION; I have noticed that many co-op listings do not include a square footage estimate but condominium listings do. Why do real estate brokers disclose the estimated square footage of a condominium unit but not a co-op unit?

ANSWER: There are a number of reasons why square footage is generally disclosed in condominium transactions but not in co-op transactions.
First, there is little data on file with New York City regarding the actual square footage of co-ops. Many co-ops in New York City were built before square footage was calculated and, in the 1980s, when many buildings were converted into co-ops, square footage was not required to be included in the offering plan. On the other hand, for condominiums, square footage is listed in the condominium’s original offering plan. This provides an authoritative reference for determining a condominium’s size.
Second, the calculations of co-op square footage that exist are frequently inaccurate. This is because, in New York City, there is no generally agreed upon method for calculating square feet. For example, while some developers include hallways, foyers, bathrooms, and unusable floor space in their calculation, others will not. Moreover, according to REBNY, &quotmany Manhattan apartments, including pre-war buildings, often have hard-to-measure elements like oddly shaped rooms, removed walls, or even turrets or alcoves.&quot
A final explanation is the difference in the type of ownership of a co-op versus a condominium. In condominium ownership, the unit owner owns real property and, accordingly, pays real property taxes that are based on the square footage of the condominium unit. However, in a co-op, the co-op shareholder does not own real property (the co-op shareholder owns shares in the co-op corporation). Thus, instead of real property taxes, the co-op shareholder pays maintenance fees to the co-op corporation based on the number of shares the co-op shareholder owns. The co-op corporation uses those maintenance fees, in part, to pay the entire building’s real property taxes (there are no real estate taxes allocated to each individual co-op unit). Consequently, for tax purposes, the square footage of the individual co-op unit is of less importance.
Important Tip:  When providing square footage for any property, Brokers must make it clear that their square footage numbers are only estimates.  If a potential purchaser or tenant is concerned about the square footage of the property, Brokers should suggest that the purchaser or tenant engage a professional to assist them in calculating and understanding the methodology of calculating square footage.  Failure to provide this disclosure may place Brokers at risk for liability if the square footage is not accurate.

BY: Neil B. Garfinkel, 
REBNY Broker Counsel
Partner-in-charge of real estate and banking practices at Abrams Garfinkel Margolis Bergson, LLP
 

Fernando Branco, GRI, ABR, CNE
Lic. Assoc. Real Estate Broker - NY
Realtor NY & CT
Graduate Realtor Institute (GRI) 
Accredited Buyer Representative (ABR) 
Certified Negotiator Expert (CNE)
Charles Rutenberg, LLC
127 East 56th Street, NY NY  10022
c: (212) 321-0115
My profiles: 
Facebook Twitter LinkedIn Blogger Facebook Page Google Plus Google Plus Page 
Working by referral. Let me help you find a home too!!

No comments:

Post a Comment