Before a Mitchell-Lama or similar co-op can even begin to debate whether or not to buy out, there has to be two votes, according to Gary Sloman, director of operations for HPD's Division of Housing Supervision.
"Some people who don't wish to cash out [sell their apartments] will have to take more money out of their pockets on a regular basis," says Sloman
On the other hand, purchasers, however, will be able to borrow against their enormous increases in equity in the form of a reverse mortgage, conventional mortgage or a home equity loan to pay the increase while still maintaining substantial equity in the future.
Financial reasons are an important consideration.
"Another issue," Sloman
says, "is that income-eligible senior citizens who are getting certain subsidies under Mitchell-Lama
may no longer be eligible to receive them."
Technically, says Sloman of HPD, "The boards do not have to disclose anything to shareholders--we don't tell them what to say except to give certain notices.
There are a number of scenarios that ultimately could take place, but Sloman
says that whatever arrangement is consummated it is ultimately up to the board and its shareholders to figure out.
"If you continue living there, you will be paying more money," agrees Sloman
Taxes are one factor that will increase maintenance.
"Taxes [on the building] will go to full taxes immediately--Mitchell-Lama pays 10 percent of shareholders' income as taxes, or less, but there is no phase-in [after a buy-out]," says Sloman
"The day after you buy out, you are paying full taxes."
A second factor is that a co-op must pay off its subsidized loans and mortgages, which means that it must finance this with a new mortgage through the private market, adds Sloman
According to Sloman
, although many Mitchell-Lama rentals have left the program and many more co-ops are contemplating it, only one Mitchell-Lama co-op (the Anthony J. Contello in Brooklyn in 1989) has actually done so as of this time.
Its namesake, Contello III, also in Brooklyn, is currently considering privatization, according to Sloman