What are HDFC Buildings?
HDFCs (Housing Development Fund Corporations) are essentially income-restricted cooperatives; they limit a potential purchaser’s ability to buy in based on whether their annual salary falls below the calculated income cap. The establishment of HDFCs were geared toward purchasers looking for a residential home to keep for a substantial period of time, with the possibility of passing it on to family members. They compose much of New York City’s affordable housing. HDFCs are further classified by the way in which the low income cap is calculated, either through a regulatory agreement with the city or without one.
If the building does have a regulatory agreement, then the income cap is based on a percentage of the median income within the surrounding neighborhood. If the building does not have a regulatory agreement, then the income cap is generated by a formula based on the building’s maintenance charges and utilities fees. Usually, the standard is to bracket the income at about seven times the annual maintenance charge. Further, the income cap will mimic the economics of the surrounding area and increase when the area becomes more affluent. For instance, as a maintenance charge increases within an HDFC building, the income cap will follow suit and allow for a greater annual salary. While HDFCs require a purchaser to fall within the low income cap, there is no requirement as per the resale price. Thus, a seller has full discretion in determining the market price of the HDFC. Nonetheless, the resale price is often regulated by the high flip tax that HDFC buildings impose (often about 30% of the profit) and the relatively limited supply of potential buyers that fit the income requirements to purchase.
The HDFC market is aimed to benefit purchasers, since a potential purchaser is able to acquire a high-profile residence at a price that is substantially lower than the market rate. The ideal purchaser is someone that has acquired a large trust or inheritance but has a low income. However, a purchaser trying to obtain funding may run into issues as banks tend to look less favorably on HDFC loans. This arises from the fact that HDFCs are seen as riskier investments, and thus have higher rates. Moreover, where a purchaser is unable to obtain bank financing, the HDFC is likely to require an all cash transaction. We would urge any HDFC purchasers to consult with a banker that has a proven track record of closing loans on HDFC projects, as the financing component of the transaction is often the piece of the transaction that has the most associated risk.
For further information on HDFCs please check out the following links:
NYC Real Estate Attorney’s Closing Report: July 2016
Just a few of our recent closings. If you are also looking to buy or sell at these property addresses, you might want to give us a call.
| Property | Value | Transaction |
| 305 West 16th Street, NY, NY | $771,000 | Coop Purchase |
| 22 Avon Road, New Rochelle, NY | $737,000 | House Purchase |
| 139-141 West 126th Street, NY, NY | $1,129,000 | Condo Purchase |
| 47 Dean Street, BK, NY | $1,850,000 | Condo Purchase |
| 25 West 54th Street, NY, NY | $1,425,000 | Coop Purchase |
| 105 Ashland Place, BK, NY | $387,000 | Coop Purchase |
| 201 East 21st Street, NY, NY | $1,100,000 | Coop Purchase |
| 361 Sterling Place, BK, NY | $318,000 | Coop Purchase |
| 47-28 11th Street, LIC, NY | $1,130,000 | Condo Purchase |
| 233 East 69th Street, NY, NY | $1,270,000 | Coop Purchase |
NYC Amnesty Program Now in Effect
From September 12 to December 12th of this year, the City will be taking part in an Amnesty Program meant to reduce or forgive certain fines and penalties from ECB (Environmental Control Board) violations. To be affected by the program, the fines must have gone into judgment before June 12 of this year. For more information, please see this announcement on the City website.
FinCen Targeting Orders Extended Through 2017
The Financial Crimes Enforcement Network (FinCen), a division of the US Treasury Department, recently extended targeting orders that went into effect earlier this year. The orders were intended to combat money laundering schemes by identifying individuals behind companies and other entities purchasing real estate. The Targeting Orders will now remain in effect until February 23, 2017 unless further amended in the future.
Beginning August 28, 2016, these Orders were also extended beyond Manhattan and into the other Boroughs of New York City, as well as some counties in California, Florida, and Texas. To find out more, see this announcement from the FinCen website.
WHFirm Attorney Speaks at Financial Fitness Workshop
Congratulations to Weidenbaum & Harari’s own Caroline Malapero, who was selected to speak at the 14th Annual Financial Fitness workshop, organized by the Financial Planning Association of New York, on October 1. Caroline took part in a panel to discuss the financial merits of buying and renting Real Estate property in New York. For further information, please see the FPANY website.
WHFirm Client Profiled in New York Times
Congratulations go out to Anthony Morena, a client of Weidenbaum & Harari, who was recently profiled in the New York Times for his condominium development projects in Brooklyn.
His recent piece in the New York Times highlights how condos in Brooklyn are proliferating, and how he is remaking his old Brooklyn neighborhood of East Williamsburg one building at a time. See the article here to see how Mr. Morena is using a “vinyl revival” approach.
NYC Real Estate Attorney’s Closing Report: June 2016
Just a few of our recent closings. If you are also looking to buy or sell at these property addresses, you might want to give us a call.
| Property | Value | Transaction |
| 180 West 58th Street, NY, NY | $1,100,000 | Coop Purchase |
| 88-17 51st Avenue, Elmhurst, NY | $459,000 | Condo Purchase |
| 44 June Road, North Salem, NY | $699,000 | House Refinance |
| 185 Withers Street, BK, NY | $1,800,000 | House Sale |
| 235 West 75th Street, NY, NY | $7,200,000 | Condo Purchase |
| 56 Jane Street, NY, NY | $505,000 | Coop Sale |
| 313 Adelphi Street, BK, NY | $600,000 | House CEMA Refinance |
| 160 West 87th Street, NY, NY | $1,360,000 | Coop Purchase |
| 200 East 94th Street, NY, NY | $1,250,000 | Condo Purchase |
| 106 Central Park South, NY, NY | $1,125,000 | Condo Sale |
Partner Jack Harari Speaks at Twitter Event
On July 21st, WHFirm partner Jack Harari was a guest speaker at Buying 101, held at the offices of Twitter in New York City to a packed audience. The event, hosted by broker Roger Ma of Charles Rutenberg LLC, was held as a resource for employees interested in learning more about the New York Real Estate market.
A Beginner’s Guide to Condops
A condop is a co-op governed by condominium rules, right? Not quite. Colloquially, “condop” often refers to a co-op that claims to have a lenient board and subsequently operates more like a condominium, but this definition is not actually correct.
In a hybrid condominium-co-op, also known as a “condop,” the building or property is divided into a multi-unit condominium, usually with separate commercial and residential units. For example, in a twenty-story high-rise building, the commercial space on the ground floor may be one condominium unit while the remaining nineteen floors containing multiple residential coop units are considered to be a second, separate condominium unit. The residential unit portion is thereby operated by a co-op corporation, while the commercial unit or units can be retained or sold by the developer.
The portion of the building that comprises the residential condo unit is broken up into small residential co-op units and ownership is largely the same as a typical co-op. Each purchaser executes a subscription agreement to purchase stock in the corporation, and each purchaser is considered to be a tenant-shareholder of the corporation that owns the residential condo unit. Unlike a regular co-op, however, the co-op corporation in a condop owns the residential condo unit rather than fee title to the entire building. The co-op corporation that owns the residential condo unit and the owner of the commercial condo unit would operate the two-unit condominium building that makes up the entire property in accordance with the condominium rules.
It is important for prospective purchasers to know the difference between a condop and a co-op or a condominium building because of the due diligence involved when looking into investing in such property. While one may look solely at the financial information for the condominium as a whole, in a condop, it is necessary to also review the financials of the co-op to determine the financial health of the investment. And it is important to note that a condop will not necessarily have a more lenient board, though this is sometimes the case.
Hopefully this clears up some of the many misconceptions that surround condops. Overall, it is important for any prospective buyer or investor to have a thorough understanding of the rules and policies of any building they hope to deal with, regardless of its label.
Sources:
Vivian S. Toy, What Exactly is a Condop?, N.Y. TIMES, May 20, 2007
NYC Real Estate Attorney’s Closing Report: April 2016
Just a few of our recent closings. If you are also looking to buy or sell at these property addresses, you might want to give us a call.
| Property | Value | Transaction |
| 71 Nassau Street, NY, NY | $1,115,000 | Condo Purchase |
| 457 West 57th Street, NY, NY | $630,000 | Coop Sale |
| 250 West 27th Street, NY, NY | $1,260,000 | Coop Sale |
| 1701 Albemarle Road, BK, NY | $390,000.00 | Coop Refinance |
| 340 East 74th Street, NY, NY | $799,000 | Coop Sale |
| 300 West 145th Street, NY, NY | $575,000 | Coop Purchase |
| 919 Mayfield Road, Woodmere, NY | $730,000 | House Purchase |
| 175 Diamond Street, BK, NY | $685,000 | Condo Sale |
| 99-05 63rd Drive, Rego Park, NY | $275,000 | Coop Purchase |
| 312 West 23rd Street, NY, NY | $543,000 | Condo Purchase |