New York has a long, drawn-out process for foreclosing on homes.
That is by design: Homeowners are given time because the loss of their primary residence can be catastrophic and is often avoidable. Residential foreclosures shouldn’t be rushed.
In contrast, non-judicial UCC foreclosures are fast — 60 days, and notices are limited. The process is intended for commercial properties, whose owners are sophisticated enough to deal with it.
Unfortunately, it also applies to co-op shares owned by regular people.
Let’s say Mrs. Smith suffers from dementia, forgets to pay her monthly maintenance charges for a while and stops reading her mail. The co-op board can foreclose on her shares and sell the unit at an auction on the courthouse steps.
It’s not uncommon for clueless owners to show up and ask the auctioneer what’s going on, only to be told their home is being sold by the board — even though its market value far exceeds the unpaid dues. Some real estate professionals are regulars at these auctions, looking to buy co-op units for a fraction of their market value, as my colleague Keith Larsen has written.
Sometimes the buyer is the co-op board itself, hoping to recoup the arrears (and then some) by buying and reselling the unit.
We have even heard of situations where the winning bidder is rejected by the co-op board, forcing another auction to be held. The board keeps rejecting winners until it becomes the sole bidder. It’s unclear how often this happens, but it’s said to be common at some buildings. Even one instance is too many.
Problems with UCC foreclosures on co-ops do not appear to be on politicians’ radar. An ideal system would balance the interests of co-op boards, delinquent shareholders and buyers.
A protracted, bureaucratic process would be unfair to boards trying to collect maintenance fees, but neither should people lose their homes in 60 days because they owe a modest amount of money and didn’t realize what was happening.
What we’re thinking about: What reform would you suggest for dealing with unpaid co-op dues? Should a guardian be appointed for the homeowner, allowing for a home equity loan or traditional sale that would pay the arrears and put any excess in the seller’s pocket? Or could a cure be worse than the problem?
Send your thoughts to eengquist@therealdeal.com.
A thing we’ve learned: Labyrinth, a company focused on streamlining permitting, came up with a “red tape index” to measure how efficiently states and localities process building permits, zoning changes and related approvals.
Not coincidentally, the worst performers were the states with the most expensive housing markets.
Massachusetts was 45th, followed by Connecticut, New York, New Jersey, California and the absolute worst, Hawaii.
Tennessee claimed the best score, followed by Florida, Texas, Indiana and Arizona.
Elsewhere…
— A developer of Pacific Park wasn’t fined by New York state for missing key deadlines because the firm threatened to sue, according to Gothamist. Greenland USA would have faced more than $1.75 million in monthly penalties after failing to complete 876 units of affordable housing by the May 31 deadline. Greenland cited “unavoidable delays.” The decks over the rail yard that were supposed to support the new housing have yet to be built.
— The New York City Landmarks Preservation Commission designated five Garment District buildings as historical landmarks ahead of Thursday’s vote on the Midtown South rezoning, amNY reported. If the City Council signs off on the designation, any future changes to the exterior or structure of the buildings would need to be approved by the LPC.
— City officials published a new master plan for New York’s greenways, Gothamist reported. The plan aims to connect more of the city’s existing greenways and includes 40 miles of new paths. — Quinn Waller
Closing time
Residential: The top residential deal recorded Wednesday was $9.8 million for a 6,576-square-foot townhouse at 37 West 74th Street on the Upper West Side. Roberta Golubock of Sotheby’s International Realty had the listing.
Commercial: The top commercial sale recorded was for five properties in Bay Ridge by ASG Equities to MCB Real Estate and Osiris Ventures for $43.6 million. The Real Deal reported the deal Aug. 5.
New to the Market: The highest price for a residential property hitting the market was $25 million for a 4,089-square-foot condominium unit in The Cortland at 555 West 22nd Street in Chelsea. Shaun Osher of Core NYC has the listing.
Breaking Ground: The largest new building project filed was for a proposed 391,830-square-foot, 387-unit residential building at 23-07 43 Avenue in Long Island City. Handel Architects filed the permit on behalf of William Xu of Grand Construction and Development.
— Matthew Elo
