Avoiding a Nightmare in your Dream Vacation...

Summer is almost here, and with it comes the annual prospect of buying and selling of summer homes and bungalows in the mountains. Generally, properties sold in developments or in bungalow colonies are sold as co-ops, a purchase of co-operative stocks in the corporation which owns the premises, joined at the hip with a long term lease for a unit situated on the premises.

Co-ops afford a buyer the peace of mind that each shareholder in cooperation with the other shareholders can control who the other buyers are. This is a huge advantage in any case, all the more so in a summer colony where crowd is everything. Co-ops also afford a buyer with a shared burden of maintaining the property.

Being well prepared before going into contract is key to the success of your purchase. Here are several areas you’d be well advised to consider when dealing with co-ops, the most abundantly type of summer homes available for purchase in the Catskill Mountains:

SOME RESTRICTIONS APPLY…

What’s in the Can [and Can’t]?

Co-op bylaws are restrictive by nature. If written correctly, these bylaws can protect you from mindless actions taken by other shareholders, in a way that sole ownership cannot. For example, co-op bylaws typically require that all units share esthetic conformity, hence your neighbor will not be able to paint their exterior in a color that is unsightly; they will not be allowed to build a large storage shed which blocks your view or access; or be accompanied by threatening animals or pets. The bylaws may also afford protective measures against a shareholder who does not shoulder its share of the maintenance burden, by allowing for the termination of its lease.

But there’s no denying the disadvantages to restrictive regulations that may prevent you from creating for yourself the best and most convenient living environment most suited to your personal needs. In the past, shareholders are known to have even been prevented from installing a security alarm because of noise level objections, or security window bars because of appearance issues.

Customize the Lease

So, do your homework, and study the lease and its bylaws very carefully to ascertain that your needs and fears are taken care of. Do not hesitate to request revisions to the lease, or that certain leniencies or exemptions be made to accommodate you. If the lease cannot be altered, but the board is willing to work with you or they simply promise not to stand in the way, be sure to receive their permission in writing.

Side note: There are halachic issues, such as what is known as Bar Metzra if, perhaps, you wish to extend your unit or have a child move in near you, that a professional halachic contract drafting firm can assist you with to save you from potential aggravation.

AT WHAT COST?

Because the cost of maintaining and repairing the premises is typically carried collectively by all share members, you can expect that a colony which houses many units may charge a lower fee for the superintendent or property caretaker than smaller premises that nonetheless requires the same amount of management personnel. On the other hand, larger premises have more amenities i.e. larger grounds to upkeep, multiple swimming pools etc. that carry a greater risk of wear and tear and require more constant upkeep and repairs versus smaller properties.

Or, say, that the majority of dwellers desire a new tennis court or perhaps a new indoor swimming pool; collective living means that a change or alteration which is desired by the majority of shareholders will be paid for collectively. However, bear in mind that, in turn, the same will require of you to participate in costs for additions or alterations which you deem unnecessary.

Since there are no standard rates for co-op maintenance fees, it is important that you understand exactly what the scope of your assessment entails. Do not accept vague generalities. Verify what exactly is included in the maintenance fee, i.e. gardening; interior/exterior repairs; fixture and facilities repair; appliance updates; rabbi on premises; day camp, etc. Prepare a checklist of what’s important to you, and match it against what’s included and what you’ll need to cover out of pocket.

Accept ‘As Is’ As Is?

If the purchasing contract has an “As Is” clause, meaning that you represent and declare that you are satisfied with the condition of the unit as is, you will need to be super vigilant in making sure that you tested all the plumbing, heating and cooling units are in working order, check for signs of leakage, mold spots, rodents, see if there are any loose wires or other electrical issues, ensure that the foundation is not cracked, ensure that the ventilation is in order, test all cabinet doors, etc.

Spot the Specks…

If you are in a position to ask for it, try to obtain some recent financials from the corporation. What you are looking for is a pattern of a constant surplus which can carry the corporation going forward about three to four months. Failure to collect cooperative dues by the management, or not maintaining a healthy surplus, will result in over the top reassessments and hikes in the maintenance fees over the years. Sloppy management will eventually result in a drastic devaluation of your purchase. So, if you can spot it early on, you may want to reconsider closing on the purchase.

IT’S A BOARD GAME!

Who’s on Board?...

In most instances, the members who comprise the board of directors are fellow dwellers on the cooperative premises. But a good neighbor can still make a difficult board member. Do your due diligence to find out if any of the board members are prone to egregious behavior such as a tendency to focus on personal gain, be it financial or egotistic, on expense of the general good of the cooperative; projecting contentious behavior towards stockholders, i.e. is argumentative or disrespectful when conducting cooperative business and affairs; or is absent or neglectful when the need for decisive action is needed.

Jump on Board?

Investigate what procedures are in place to acquire board membership. If you have found the summer home of your dreams, but are concerned that one or more board members exhibit any of the habits described above, your best option might very well be to go ahead with the purchase with the hope of ousting or replacing the problematic board member. A disruptive board member can make your life miserable, so find out if the option to remove and replace is viable. Of course, you’ll need to assess your own capabilities at serving on a board - no easy feat.

Since a co-op board can re-assess your maintenance dues; object to potential buyers of your cooperative stake; and otherwise make life difficult with restrictive rules and regulations, so doing some character research is wise and in place.

NOW THAT YOU KNOW…

In the end, it’s a balancing act, and preparation is empowerment. Have your purchase offer reviewed by a professional contract drafting firm, and never be afraid to walk away from a deal that works against you. The heartache that follows a walkout does not compare in enormity to the pain caused by not walking away.

Hopefully, your summer experience will truly be a dream come true, and you’ll be the proud key holder of a summer home worth your efforts.