Most people obtain financing when purchasing a house, condo, or co-op. In that case, the contract of sale will contain a mortgage contingency clause making the sale contingent upon the buyer obtaining a mortgage in a certain amount. If the buyer's loan application is denied by the lending institution, the buyer can then cancel the contract and get the down payment back.
In order to benefit from the protections allowed by the mortgage contingency clause the buyer must strictly abide by all its terms, i.e. the buyer must only apply for a loan in the amount stated in the clause (or such lesser sum as buyer shall be willing to accept), and obtain the mortgage within the time frame given in the clause. If the buyer applies for a loan greater than the amount stated in the clause and is then denied a loan, the buyer will have forfeited the protection afforded by the clause and will not be able to cancel the contract. If the buyer is then unable to obtain other funds to complete the purchase the buyer will be in default under the terms of the contract and more than likely lose their down payment. On the other hand, if the buyer is approved for a loan greater than stated in the mortgage clause, then no problem. Nonetheless, I would never advise a client to take such a risk and put their down payment in jeopardy. There are many reasons why the loan may be denied that have nothing to do with the financial qualifications of the buyer and are beyond the buyer's control. An experienced real estate attorney will help you navigate through this process.
The mortgage contingency clause is there to protect your down payment should your loan be denied. To best protect yourself when purchasing a home with a mortgage, hire an experienced real estate attorney who fully understands all aspects of the mortgage contingency clause and will guide you through the entire closing process.
To speak with an experienced real estate attorney, call us at (516) 314-8433. To learn more about our services and how we can assist you, visit us at www.jreardonlaw.com
News About the Cooperative/Condominium Abatement
Recently, the NY State Legislature passed bill S2320/A3354, which amended the Co-op/Condo Abatement. For more information and a description of changes, click here.
Owners of cooperative units and condominiums who qualify for the Co-op/Condo Property Tax Abatement can have their property taxes reduced. The amount of the abatement is based on the average assessed value of the residential units in the building.
Abatement percentages are shown in the following table:
Average Assessed Value Benefit Amount Per Year
2012/2013 2013/2014 2014/2015
$50,000 or less 25% 26.5% 28.1%
$50,001 - $55,000 22.5% 23.8% 25.2%
$55,001 - $60,000 20% 21.2% 22.5%
$60,001 and above 17.5% 17.5% 17.5%
Co-op Tax Benefits Letter
Finance will be mailing a Co-op Tax Benefits Letter outlining each unit's tax savings for personal exemptions and the co-op property tax abatement. For more information and the Co-op Tax Benefit Change Form, click here.
Phase Outs for Owners Currently Receiving the Abatement
If you are an owner who is not using the unit as your primary residence and you received the abatement in 2011/2012, your abatement will be phased out. We mailed you a letter explaining that we think you no longer qualify for the abatement. As the deadline to respond to the letter has been extended, responses must be mailed by July 22, 2013 and sent to:
NYC Co-op/Condo Abatement P.O. Box 1194 Maplewood, NJ 07040
This is how the phase out will work:
Tax Year Phase Out Abatement Amount How You or Your Co-op Board Will
See This on Your Bill
2012/2013 50% of the 2011/2012 abatement You or your board will see an Abatement
percentage you received before the Reversal Charge on your 2013/2014
abatement was amended. Property Tax Bills.
2013/2014 25% of the 2011/2012 abatement You or your board will see a reduced
percentage you received before the abatement amount on your 2013/2014
abatement was amended. property tax bills starting with your July
2014/2015 0% Abatement will no longer appear on
your property tax bill.
How to Apply
Cooperative and condominium developments that are filing for the abatement for the first time should complete the Cooperative and Condominium Property Tax Abatement application. The application must be submitted by the board of directors or managing agent on behalf of the entire development.
Deadline: Applications for new cooperative and condominium developments were due April 1, 2013.
Application for 2014/2015 Coming Soon
Cooperative/Condominium Tax Abatement FAQ
The co-op or condo unit must be the owner's primary residence.
Co-op or condo owners cannot own more than three residential units in any one development and one of the units must be the owner’s primary residence.
Co-op or condo owners cannot be receiving any of the following exemptions or abatements:
420c, 421a, 421b, or 421g
Housing Development Fund Corporation (HDFC)
Division of Alternative Management Programs (DAMP)
Limited Divided Housing Companies, Redevelopment Companies
Units held by sponsors or their successors in interest are not eligible.
Units owned by a trust are eligible only if the unit is the primary residence of the beneficiary of the trust, trustee, or life estate holder.
For more information on requirements and recent changes to the abatement click here.
Note for Property Owners:
You may also be eligible to receive the following personal exemptions: Basic or Enhanced School Tax Relief (STAR), Disabled Homeowner, Senior Citizen Homeowner and Veterans. The application for these exemptions must be postmarked by March 15. If you own a co-op, contact your management company to find out what exemptions you are receiving in the current tax year (July to June). Call before March so that you will still have time to apply for benefits in the next tax year. If you own a condo, you can find your current exemptions on your Property Tax Bill
It is a commonly accepted practice for home buyers to purchase title insurance. Title insurance provides buyers, and their lenders with coverage up to the full purchase price of a home in the event a valid title claim is instituted against the property. Buyers of co-ops, however, rarely purchase title insurance.
Since co-op buyers are not purchasing real estate, but rather shares in a corporation – accompanied by a proprietary lease that gives the buyer the right to live in the co-op, traditional title insurance would not cover the buyer's ownership interest in the shares. Consequently, the Title Rate Service Association (or Tirsa) created an endorsement to the standard title insurance policy that would cover co-ops. The Tirsa endorsement is known in the title industry as "leasehold title insurance." This endorsement insures the buyer's interest created by the proprietary lease.
Just as title insurance provides protection in the event that the title search conducted before closing failed to uncover a valid lien against the real property, the leasehold endorsement provides similar protection in the event the lien search failed to uncover liens against the seller of the co-op. However, the Tirsa endorsement never really caught on with co-op buyers.
As an alternative to the Tirsa endorsement, the State Insurance Department, approved the Eagle 9 policy for sale by title companies to co-op buyers. The Eagle 9 – unlike the Tirsa policy, is not a real estate policy with an endorsement. Rather, it is a policy specifically designed to insure the buyer's interest in the co-op. The Eagle 9 policy insures the buyer for loss and legal expenses resulting from claims arising against previous owners of the co-op.
Additionally, the Eagle 9 policy is significantly less expensive than the Tirsa policy.
Here are some instances where a co-op buyer should consider purchasing an Eagle 9 policy:
Seller is in bankruptcy
Buying from an estate or heirs of a deceased seller
Buying a foreclosed co-op (REO)
Federal tax lien filed against seller in another state (will not be found by a typical search in New York)
Considering the substantial investment involved in purchasing a co-op, the cost of the Eagle 9 policy, which is far less than title insurance for real property or the TIRSA endorsement, is a worthwhile outlay in order to protect your investment and give you peace of mind.