Building types
HDFC co-op
An affordable cooperative formed under Article XI of the Private Housing Finance Law, with income caps on purchasers and usually a restricted resale price.
What is an HDFC co-op and who is allowed to buy one?
Quick Answer
What is the property interest, legally?
- The corporation is organized under Private Housing Finance Law Article XI and holds a regulatory agreement with the City
- The regulatory agreement, not the market, sets the income cap and often the resale formula
- The cap is stated as a multiple of area median income and is verified from tax returns before approval
- A resale price restriction, where one exists, limits what the seller may accept regardless of demand
- The regulatory agreement has an expiry date, and what happens at expiry belongs in the review
How is a purchase of this type financed?
- Fewer lenders write HDFC loans, and the ones that do underwrite the regulatory agreement as well as the borrower
- A resale restriction affects appraised value, which affects the loan amount a lender will approve
- Some buildings cap the loan-to-value ratio in their own documents, below what the lender would allow
- Down payment minimums set by the building are frequently higher than a market co-op’s
Which taxes and building fees apply?
- NYS transfer tax and NYC RPTT apply to the share transfer as they would on any co-op
- No mortgage recording tax, because the loan is a UCC filing rather than a recorded mortgage
- The flip tax usually runs to the corporation and can be a large percentage of the sale price
- The mansion tax applies at the statutory threshold, which few HDFC sales reach
What does the approval path look like?
- Confirm the current income cap and household-size adjustment with the managing agent before signing
- Confirm the resale formula and the flip tax percentage in writing
- Board package assembled with income documentation the regulatory agreement requires
- Board review and interview, then approval subject to income verification
- Closing scheduled once the lender has accepted the regulatory agreement
What income limit applies to an HDFC co-op?
It is set in that building’s regulatory agreement, not by a citywide rule, and it is stated as a multiple of area median income adjusted for household size. Two HDFCs on the same block can carry different caps, so the number comes from the managing agent in writing.
Can an HDFC co-op be resold at market price?
Often not. Many regulatory agreements cap the resale price by formula, and most impose a flip tax to the corporation that takes a substantial share of any gain. Both terms are in the building documents, and both change what the unit is worth to a purchaser.
Why do lenders treat HDFC co-ops differently?
Because the regulatory agreement limits what the lender can recover on a default. A restricted resale price caps the collateral value, and the corporation’s flip tax is deducted before the seller sees anything. Fewer lenders write these loans, and those that do apply their own overlays.
What else should you read before closing?
In the glossary
- Flip taxA transfer fee charged by a co-op or, less often, a condominium when a unit changes hands. It is a creature of the building's governing documents, ...
- Co-op lien searchThe search performed on a co-op purchase covering UCC filings, judgments, liens and unpaid building charges tied to the shares and to the selling s...
- Transfer tax (RPTT and NYS)Taxes on the conveyance itself, one City and one State. Rates step up at higher prices, and who pays is set by custom and then confirmed by the con...
- UCC searchA search of UCC filings for security interests in personal property, run against the seller and, on entity deals, against the entity itself.
- CovenantA recorded promise or restriction that runs with the land and binds future owners. Restrictive covenants limit what the property may be used for or...
Questions this raises
- What do I need to bring to a closing in NYC?Photo ID, funds in the form the agent instructed, a checkbook for adjustments, and every signer. The New York City closing checklist for buyers and...
- What documents do I sign at closing?Note, mortgage, title affidavit, settlement statement and transfer tax returns for buyers; deed and releases for sellers. What each document actual...
Building types
- Standard co-opThe ordinary New York City cooperative: you buy shares in a corporation and receive a proprietary lease to occupy a specific apartment.
- Mitchell-Lama co-opA limited-equity cooperative in the State and City Mitchell-Lama program, sold from a waiting list at a formula price rather than on the open market.
- Land-lease co-opA cooperative that owns its building but leases the ground beneath it from a separate landowner, on a lease with a reset schedule and an expiry date.
- CondopA building split into two condominium units, one commercial and one residential, where the residential unit is owned by a cooperative corporation.
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Legal Disclaimer: This page is general information about New York practice. It is not legal advice, it does not account for the terms of any particular contract, building or transaction, and reading it does not create an attorney-client relationship. This is attorney advertising. Prior results do not guarantee similar outcomes.