DIVORCING WITH A COOP TO EQUITABLY DISTRIBUTE? WHO GETS WHAT?
When you are divorcing with a COOP to equitably distribute, it can get hairy. The New York Times tackled this question recently. It seems a whole bunch of possibilities exist for divorcing couples with respect to their coop and condo. Usually, first of all, one spouse will likely buyout the other spouse. This is going to mean getting refinancing which may be difficult, depending on the situation, because where there were two incomes, post-divorce there may only be one. So getting qualified by a bank for the refinance could be an issue. This is true for both coops and condos probably, but with coops, where there are shares vs actual ownership of the property, the issues might be more delicate because the rules of transferring shares could vary depending on the coop whereas with a condo they own the property and can dispose of it as they wish since it is their real estate.
And another issue is that the coop board may think that the newly single spouse won’t be able to afford the maintenance. According to urbandigs.com:
Co-ops are generally looking for: – 20 – 25% down payment (sometimes more, rarely less) – 18 months at a minimum and most likely 2 years of mortgage and maintenance payments left over in reserve in liquid assets (401Ks and IRAs do not count!) after the down payment (Sutton Place and Park/5th Ave buildings frequently look for much higher reserves – this at least gives you a ballpark requirement for most co-op buildings) – A 25 – 28% debt to income ratio (if your payments are $3,000/month, you need to gross about $12,000/month) So if you are going through a divorce where you may be required to pay alimony or child support in the future, a board is going to be very concerned about your future debt to income ratio, even if your current numbers are great.
So it is possible, post-split, that a board could withdraw its approval of the now single tenant. The board conceivably could force a sale of the coop in fact. The board could also evict a tenant for unpaid maintenance charges (this is a common problem after divorce where a couple reaches a stalemate over who is responsible for maintenance charges that have fallen into arrears).
On the other hand, the parties may want to or need to sell the apartment. This, too, could be a problem in terms of getting board approval, and thus, finalizing the financial aspect of the divorce can be delayed – sometimes by years -due to this real estate matter.
So the takeaway is that it seems that primarily, the bigger issues are going to be with the coop board allowing the left behind spouse to stay in the apartment.
In addition, a party in a divorce action will have to provide the board with a judgment of divorce. This is the document that gives information on a bunch of things like how strapped the new tenant is likely to be post-split on account of expenses like alimony and child support. (the divorce judgment serves other functions of course; for example it will alert the board if one spouse is to be excluded from the building or any other scenarios.) Read more at www.nyt.com