What Does a Co-op to Condo Conversion Cost?

Why is there no price per unit?

Because buildings are not alike in the ways that cost money. Size alone changes the arithmetic, since the same body of legal and administrative work spread across a large community costs each household less than it does in a small one. A published number would have to be wrong in one direction or the other for almost every board that read it, and boards that have been given one usually find out later which direction it was wrong in.

What moves the number for a building like yours?

What your conversion has to carry. In many buildings the conversion is financing an underlying mortgage that has to be paid off, property taxes in arrears, capital repairs the community has already been told it needs, and a reserve fund that has to be put back on its feet, all inside the same transaction. A building carrying none of that is a shorter piece of work than a building carrying all of it. Your governing documents matter too, since documents that were never updated take longer to bring into a form a conversion and a lender will both accept.

How is Hutton paid?

We are paid one fee per unit, due at the closing, and we earn it only when the conversion succeeds and the deeds are delivered. Nothing is billed to your corporation on the way there, and we carry the costs and the risks of getting your building to that closing, including the risk that your shareholders decline to approve it. Where a shareholder would sooner finance their share of that fee than write a check at the closing, AIP and the Group Fund are how it gets financed. Both are arrangements for paying the same fee, and choosing one changes when a shareholder pays and not whether the fee exists.

What does the fee cover?

The whole of the work, which is the point of quoting it as one number. It carries the legal costs, the architectural and engineering fees, the title searches, the document preparation and the administration of the conversion itself. It also carries the shareholder education we run, the professional services your building would otherwise buy one at a time, and the engineering study that establishes what your reserves will have to hold for future capital work. Other conversion companies treat several of these as additions to a base quote, which is how a per-unit cost that sounded low at the start arrives much higher at the closing.

What does a shareholder actually pay out of pocket?

In most cases, nothing at the closing. Each shareholder's obligation, their share of the underlying mortgage, the conversion fee and closing costs, can be financed into the new condominium mortgage, and an existing share loan is wrapped into the same loan. Where the building borrows for the conversion as a whole, the cost is repaid through the monthly condominium fees, which is a small monthly figure in place of a payment anyone has to find. Beyond ordinary financing and closing costs, there is no further expense to a shareholder in the conversion.

How does your board get a real number?

By having someone read the building. Your unit count and share allocation, your underlying loan obligation, your financial condition and your governing documents together produce a figure, and until all four have been looked at, nobody has one.

That reading is our feasibility study, and we prepare it at no cost and no obligation to your board or your members. It ends with the advantages and the disadvantages of converting your building set out side by side, sample unit analyses with appraisal reports, and the costs your conversion would actually require. Your board can take that to its shareholders. A quoted average would only have started the argument over whose building it described.