Building types
HDFC co-op
An affordable cooperative formed under Article XI of the Private Housing Finance Law, with an income cap on purchasers and a flip tax that runs to the corporation.
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 its terms sit in the building’s governing documents: the certificate of incorporation, the City deed and, where one exists, a regulatory agreement
- Private Housing Finance Law 576 caps purchaser income at six times annual maintenance plus utilities, or seven times where there are three or more dependents
- That figure runs against a ceiling of 165 percent of area median income, unless the deed or a regulatory agreement sets a lower limit such as 120 percent of AMI
- The income shown is verified from tax returns before approval, and the household-size adjustment is applied at the same time
- A resale price formula binds only where a regulatory agreement imposes one, and most older in rem buildings never signed one
How is a purchase of this type financed?
- Fewer lenders write HDFC loans, and the ones that do underwrite the building’s governing documents as well as the borrower
- A capped purchaser pool, and any resale restriction, affects appraised value and so 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 the income documentation the governing documents require
- Board review and interview, then approval subject to income verification
- Closing scheduled once the lender has accepted the building’s governing documents
What income limit applies to an HDFC co-op?
It comes from that building’s governing documents rather than from a citywide rule. Private Housing Finance Law 576 sets it at six times annual maintenance plus utilities, or seven times with three or more dependents, against a ceiling of 165 percent of area median income, unless the deed or a regulatory agreement sets a lower limit such as 120 percent of AMI. 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?
It depends on the documents. Where a regulatory agreement exists it may cap the resale price; in most older HDFCs the limit on price is the purchaser income cap plus the flip tax, which 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 governing documents limit what the lender can recover on a default. The income cap narrows the pool of purchasers who could take the unit at a foreclosure sale, 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.
This building type, borough by borough
- HDFC co-ops in ManhattanManhattan’s HDFC stock came out of the City taking title to abandoned buildings north of 96th Street and on the Lower East Side, then selling them ...
- HDFC co-ops in BrooklynBrooklyn’s HDFC buildings sit in Bedford-Stuyvesant, Crown Heights, Clinton Hill and Bushwick, and many of them are small enough that the board is ...
- HDFC co-ops in the BronxThe Bronx holds a dense band of HDFC buildings through Mott Haven, Highbridge, Morrisania and the Concourse, most of them formed out of the City’s ...
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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.