The New York Times _____________________________________________________________________ March 16, 2003 Combining Two Co-ops or Condos By JAY ROMANO Some real estate lawyers in New York say they are fielding an increasing number of requests by clients seeking to combine two and even three co-op or condominium apartments into one. While such a task can usually be accomplished, the lawyers say, it is a more complicated procedure when the building is a condominium than when it is a co-op. "Over the past several months we have had an unusually high number of clients asking us whether it is possible to do apartment combinations," said Dennis H. Greenstein, a Manhattan lawyer who specializes in co-op and condominium law. With a co-op, Mr. Greenstein said, combining apartments is a relatively straightforward undertaking because of the way a co-op corporation is structured. In most cases, he said, the co-op corporation owns the entire building and the land the building sits on, and the corporation itself is owned by shareholders who have been issued stock. Each apartment in the building is allocated a specific number of shares, and the right to occupy each apartment is reflected in a document known as the proprietary lease. When an apartment is sold, Mr. Greenstein said, the proprietary lease and the shares allocated to that apartment are transferred. So, he said, when a co-op shareholder wants to buy an adjacent apartment to combine with an existing apartment, all he or she has to do is obtain the consent of the co-op corporation to purchase the stock and proprietary lease from the current owner and to make the alterations necessary to combine the apartments. Even though the total number of apartments in the building is being reduced as a result of the combination, it is usually not necessary to change the building's certificate of occupancy. Instead, the apartment-owner's architect or engineer will obtain what is known as an Alteration Type 2 permit, a document that allows the apartments to be combined. With a condominium, on the other hand, each apartment in the building is a separate and unique piece of real estate owned by individual unit owners. The land the building sits on along with common elements of the building like hallways, storage areas and the basement are owned by all unit owners, with each owner's share of the common elements being tied to his or her apartment. So, to use a simple illustration, in a 100-unit condominium of identical apartments, each apartment owner would own his or her apartment along with a one-hundredth share of the common elements. Still, buying the apartment next door and then breaking through the wall to legally combine the two usually involves the consent of other unit owners in the building. Arthur I. Weinstein, a Manhattan co-op and condominium lawyer who is also vice president of the Council of New York Cooperatives and Condominiums, said: "There are major differences between combining co-op apartments and combining condominiums. And the most important difference is that in a co-op, the board has the intrinsic power to do the transaction itself. But in a condominium, to do it right, you usually have to have the unit owners approve an amendment to the condominium declaration." Mr. Weinstein explained that in a condominium, each unit is a separate piece of real estate defined explicitly in the condominium declaration, a document submitted to the city surveyor's office and filed with the city register. "To create a condominium, you file as a public record the declaration along with precise floor plans of each unit," Mr. Weinstein said. As a result, he said, if the floor plans of a particular unit are going to change that is, by being combined with an adjacent unit the filed declaration has to be amended. "And in most cases," Mr. Weinstein said, "amending the declaration requires the consent of a supermajority of unit owners," usually two-thirds or three-quarters of the unit owners. In other words, he said, instead of needing the approval of only the board, as in a co-op, a condominium unit owner needs the approval of the other owners as well to combine apartments. It has sometimes happened, Mr. Weinstein said, that a unit owner has simply bought the next-door apartment and then obtained the consent of the condominium board of managers to connect the apartments by cutting through an interior wall. But that, he said, could create problems for the unit owner. "If there is a bank loan on either apartment, the bank better consent to what you're doing because suddenly the collateral the bank is holding has changed," he said, explaining that if, for example, the kitchen is removed from one apartment, that could change the value of the collateral held by the bank that had the mortgage on that apartment. Even more significant consequences could follow when the owner attempts to sell his combined apartment. "Some bank 20 years from now may very well be afraid of making a loan to a new buyer unless the bank is comfortable that the condominium association has approved the combination of the units, that there is one deed for the entire apartment and that the condominium has filed an amended declaration," he said. And while it might be possible to amend the declaration at the time of the sale, he said, "you're going to be dealing with a different board and different unit owners who will exist 20 years from now." An even more difficult problem arises when a unit owner wants to combine two or more units and then convert hallway space to personal space. With a co-op, Mr. Weinstein said, the co-op board can simply issue shares for the space and sell the shares to the person combining the apartments. When that is done, he said, in addition to the money the co-op receives upon the sale of the new shares, it also gets additional maintenance charges on the combined apartment because the owner now owns more shares. With a condominium, however, since the common elements are owned proportionately by all unit owners, it is not possible for the board of managers to simply sell hallway space to a unit owner. It is possible, however, for the condominium association by amending the declaration with the consent of the unit owners to redefine the common elements to include the hallway space being sought by the owner combining apartments as a limited common element for the exclusive use of that apartment. Since that will give the unit owner exclusive use of space that had previously been common to all, the unit owner who gets the space should pay the condominium association for the use of that space. "In an apartment combination I'm doing now, the condominium association is charging the owner about $30,000 for about 50 square feet of hallway space," Mr. Weinstein said, adding that typically the unit owner doing the combining also pays all legal fees incurred by the condominium association. Mr. Greenstein, the Manhattan real-estate lawyer, said there is another way for a condominium association to allow a unit owner to use hallway space. "What a lot of buildings are doing is giving licenses to the unit owners to use the hallway space," he said, adding that when that is done the board can charge for the space but does not have to amend the declaration of condominium. Moreover, he said, in cases where a unit owner or a condominium association does not want to go through the trouble of legally combining two apartments by amending the declaration, it is possible for the owner to just keep both units as two separate pieces of real estate, but use them as one. In fact, Mr. Greenstein noted, there may be a benefit to keeping the apartments separate. "When the kids move out," he said, "you can always turn your two-bedroom apartment back into a one-bedroom and sell the other unit." Copyright 2003 The New York Times Company | Privacy Policy