Manhattan Condos - New Developments - Conversions - Resales: November 2011

Guarantors and Parents buying homes for Children

Manhattan Real Estate

Over the years I have sold and rented many apartments where a guarantor was needed. I have also sold apartments where parents and/or trust funds bought the apartment outright for an adult child or beneficiary.

In a condo it is very simple. A parent can buy for an adult child. A corporation and or a trust can buy a condo. Some condos have applications but many don't or have very simple applications. I recently had a condo transaction where the couple obtained a mortgage from their parents. As far as the seller, listing agent and the condo were concerned it was a Cash Sale. I presented proof of funds with the offer. A condo may require documentation but they can't reject a buyer. They can only exercise their "right of first refusal" and purchase the apartment for the same price and terms of offer.

It becomes more difficult purchasing a coop and even renting in certain Manhattan buildings. Most coops will not allow a parent buying for their adult child. Many coops will allow co-purchasing or a guarantor for working adult children. Even if the parents pay for the apartment, the coop will want the adult to be working with their own income and be responsible to pay the monthly maintenance and/or mortgage payments. The monthly housing costs can not exceed 25-30% of the adult child's monthly income.

Some rental buildings may require the parent to be on the lease. Some may not accept out of town guarantors and/or may require a few months of rent up front and additional security deposit. 40x rent in annual income is required by applicant and 80x rent is required to be a guarantor.

The coop will want full financial disclosure from both the guarantor and the applicant and from both applicants if a co-purchase. A guarantor letter and a gift affidavit is usually required as well.

The only alternative other than a condo purchase is purchasing a sponsor coop apartment. The sponsor is usually the developer or owner of building that has "un-sold shares" in the cooperative corporation. I recently sold a coop sponsor apartment to parents in Ohio for their son that recently graduated college here. Purchasing a sponsor apartment in a coop is buying "un-sold shares" there is no board approval process. However once purchased the shareholder has to adhere to the coop rules, enjoys the same "quality of life" as other shareholders but when unit is re-sold there is board approval and a board package is required.

Recently I have been working with a corporation looking for a duplex penthouse rental for corporate use. While the corporation has excellent financials, documented assets and cash flow, landlords asked for a guarantor. At first I was surprised because of the financial documentation I was able to provide.

While the Supreme Court of the United States ruled that a corporation is a person, New York landlords think otherwise. They want a personal guarantee from a person.

Lease "Good Guy" Guarantees

A good guy guarantee is a limited personal guarantee often written into a lease when a tenant is a business entity such as a corporation, partnership or limited liability company.  The guarantee, generally signed by a principal of the business entity, enables a landlord to bring an action against the guarantor in the event the tenant stops paying rent and continues to occupy the space.  A good guy guarantee is not necessarily onerous to a tenant. Although after a default, the landlord is free to pursue the tenant for unpaid rent (if there are any assets left in the business entity) the guarantor is released from its obligation to pay rent once the tenant vacates the space.  From a landlord's perspective, a good guy guarantee is an insurance policy against the amount of time it can take to evict a non-paying tenant (something that often takes a year or more).


courtesy of:

 

 
   

________________

©Mitchell Hall 2006-2016

All content/images, unless noted, are the property of Mitchell Hall & may not be used without permission. 

Blogging about Manhattan Real Estate since 2006

Mitchell Hall (Licensed as Mitchell J Hall)

Licensed Associate Real Estate Broker
Office (212) 877-6268 | iPhone (917) 312-0924
MHALL@Corcoran.com

Manhattan Seller | Manhattan Buyer | New Developments | Market Reports | Neighborhoods

 

My Google Profile

Corcoran Group         Google +

 
          Call Mitchell Hall @ 347-921 HALL (4255)
Comment balloon 2 commentsMitchell J Hall • November 28 2011 09:41AM
Guarantors and Parents buying homes for Children
share
Over the years I have sold and rented many apartments where a guarantor was needed I have also sold apartments where parents and/or trust funds bought the apartment outright for an adult child or beneficiary. In a condo it is very… more
'Tis The Season! Awesome Apthorp
share
The Apthorp 390 West End Avenue - West 78th -West 79th at Broadway The elegant full-block apartment complex built by the Astor family for the New York elite. The History • Built in 1908 • The vision of William… more
The Dillon: Market Update Townhouse Units
share
The Dillion - Clinton/Hells Kitchen - New Condo Development The Dillon, a new development, 83-unit condominium at 425 West 53rd Street between Ninth and 10th avenues, had a broker party recently to debut its townhouse… more
Happy Thanksgiving to All
share
To all my ActiveRain friends and blogging buddies wishing you and yours a very Happy and Healthy Thanksgiving. Mitchell If you're on the Upper West Side for Thanksgiving check out The Macy's Thanksgiving day… more
Friday Fotos: Galactic Spectacular Upper West Side
share
The American Museum of Natural History is located on Central Park West between 77th and 81st Streets The museum's Rose Center for Earth and Space at the Hayden Planetarium is a galactic spectacular Bright green… more
What Manhattan Sellers Actually Have Control Over
share
The volume of options in Manhattan apartments tends to result in a pretty efficient marketplace where attractive opportunities result in action. What Do Manhattan Sellers Actually Have Control Over? Location? No Room Count? No … more
Good Luck NYC Marathon Runners
share
Photo Courtesy of Central Park Conservancy More than 45, 000 runners and 200, 000 spectators are expected in Central Park today for the 2011 ING NYC Marathon. Every year, the first Sunday in November, New York Road Runners present… more