Page 8 - CooperatorNews New York Expo May 2022

8 COOPERATORNEWS — MAY 2022 COOPERATORNEWS.COM CooperatorNews.com From COOPERATORNEWS.COM COVID, WFH, Slow Construction Russian Sanctions, New York Keep Housing Demand High 2021 Average Sale-to-List Ratio in NY/NJ Metro Was 100.4% BY MIKE LAFIRENZA New Local Law Requires Parking Garage Inspections LL126 Could Mean Additional Costs for Co-ops & Condos BY A.J. SIDRANSKY Local Law 126, which mandates the periodic inspection of parking facilities for structural soundness and safety, was passed in 2021 and went into effect in January of this year. The law requires that parking structures be inspected every six years. The inspection cycle is staggered: • Cycle 1 runs from January 1, 2022 through December 31, 2023 and includes Manhattan Community Districts 1, 2, 3, 4, 5, 6, and 7 • Cycle 2 runs from January 1, 2024 through December 31, 2025 and includes Manhattan Community Districts 8, 9, 10, 11, and 12, and all Brooklyn Community Districts • Cycle 3 runs from January 1, 2026 through December 31, 2027 and includes all Bronx, Queens, and Staten Island Community Districts Steps for compliance can be found here: https://www1.nyc.gov/site/buildings/safety/park- ing-structure.page. Genesis of the Law According to Chris Alker, vice president of building operations for AKAM, a management firm with offices in New York and Florida, “The City’s new law was predated by a New York State statute under which structures in New York City were exempt while the city wrote and instituted its own version. The original New York State law was precipitated by a couple of parking garage collapses upstate.” Luckily, the type of construction generally used for garages upstate is differ- ent from what’s used here in the city—but the incidents upstate served to put lawmakers on with a ramp,” says Alker. “The board might have to ask all users to remove their cars,” which notice about the importance of regular, professional inspections of the city’s 1,000-plus parking of course means that all the vehicles formerly housed in the garage must now find street park- structures. What Are the Requirements? “That’s the million-dollar question,” says Alker. “The law is very new. The New York City Department of Buildings (DOB) hasn’t rolled out the details and requirements yet. We are an- ticipating it will mirror façade inspection requirements under Local Law 11, beginning with a visual inspection to note any and all problems with conditions. Further investigations will be required where there are red flags. Potential red flags could be things like spalling concrete or signs of water infiltration, among other things.” Impact on Co-ops & Condos? Alker explains that as it stands, the current building code requires that all buildings—garages included—be kept in good repair as a matter of course. The new bill, though, will require build- ing owners to secure outside engineers to do inspections of parking structures specifically. These engineers will have to be qualified by the City to perform the inspection, and there will also be filing fees to take into account. Any unsafe conditions found during the inspection will gener- ally require immediate action to correct—and those repairs will of course cost money as well. Noncompliant buildings will face violations and penalties. Worst Case Scenario In the event that a serious structural problem is found during a garage inspection, a co-op or condo board could be faced with a very difficult decision. For example, “Say there is a problem continued on page 9 Even two years into the COVID-19 pandemic, Americans are finding that buying a home remains challenging. A growing work-from-home economy, fueled by households with newfound financial liquid- ity, has boosted the nation’s demand for homes. Meanwhile, a housing construction industry weakened by the COVID-19 pandemic has allowed the national housing stock to dwindle. Existing houses are selling faster and at record prices, with some states and metro areas being hit harder than others. The personal savings rate—a measure of people’s income left over after regular spending and taxes— increased by 155% from January 2020 to January 2021 during the COVID-19 pandemic. Over the same period, more than a third of households reported an increase in time spent working from home. The com- bination spurred many American families to relocate, raising total demand for homes across the nation. However, labor restrictions and supply chain bottlenecks in construction materials during the pan- demic reduced single-family housing starts sharply during the spring and summer of 2020. New home construction didn’t regain its previous pace until later that fall; however, ongoing supply chain challenges have continued to impact housing completions, decreasing the nation’s supply of available homes for sale. The nation’s available housing stock, which is measured by the number of months it would take for current inventory to sell, fell from a 2.6 month supply in the summer of 2021 to just a 1.6 month supply at the beginning of 2022. In large part because of this, the U.S. Home Price Index increased roughly 30% from January 2020 to the end of 2021. The total quantity of home purchases in the economy oscillates seasonally, fading each fall and boom- ing each spring as families tend to move during the school breaks of summer. However, the overall trend reveals that when robust housing demand meets anemic housing supply, homes tend to sell faster and at a higher selling price—often higher than the asking price. To illustrate, in 2019, the year prior to the pandemic, just over 37% of all homes listed for sale that year were sold in less than two weeks after listing. That proportion increased to over 52% in 2021. Further, the national sale-to-list price ratio rose each year, exceeding 100% for the first time in 2021. Today, the average American home sells above its asking price. Examining state level data reveals that those with higher prices largely faced disproportionate compe- tition for homes last year. In 2021, the average sale-to-list price percentage in each state was positively cor- Real Estate How the War in Ukraine May Be Felt in the City’s Luxury Buildings BY A.J. SIDRANSKY The continuing war in Ukraine and the accompanying sanctions imposed by the U.S., E.U., and their allies reach into our own backyard. Many Russian oligarchs own luxury apart- ments and other real estate in New York and elsewhere in the United States. What is the practical reality of those sanctions for co-op and condominium communities? Seizures & Sales Can the government confiscate someone’s real estate because of their connection to or involvement with a sanctioned foreign power? “The short answer is, ultimately, yes,” says Mark Hakim, an attorney with Schwartz Sladkus Reich Greenberg & Atlas, a law firm based in Manhattan. “However, the process of seizing and taking a property is quite involved—it’s not as easy as, say, freezing an asset or filing a lien for unpaid taxes. Seizing an apartment is further complicated by the various corporate structures, LLCs, and levels of ownership—but presuming the government works its way through the corporate structure and ultimately seizes an apartment, we advise our boards to comply with the seizure orders.” William McCracken, a partner with Ganfer Shore Leeds Zauderer, also based in New York, adds, “I know that in the U.K., there has been a great deal of discussion and activity around seizing property held by Russian oligarchs in London. Nothing like that has hap- pened in New York—at least not yet. There have been sanctions issued by the Office of For- eign Assets Control (OFAC) at the federal level targeting a select group of Kremlin insiders, and so any transactions in the United States involving those individuals are now prohibited. That would of course include their buying or selling condo units. But in the context of the New York City real estate market, you’re talking about a vanishingly small number of deals that might be affected, most of which are done through anonymous LLCs, which make it dif- ficult if not impossible to trace the actual individuals involved.” Hakim adds that “to the extent their assets are frozen, for example, one or more \[oli- continued on page 9 continued on page 9