That’s what brokers will tell you till they’re blue in the face. But when you have repeated maintenance hikes and assessments due to an incompetent board, I think it eventually evens out.
Asbestos. A $2.4 million heating bill. Neighbor fighting neighbor. An onerous mortgage, inflated maintenance, emergency assessments, shareholder mutiny and, finally, a federal investigation into possible criminal misconduct. And just when the co-op appeared to have weathered the worst, it was hit with the ongoing fallout of the credit crisis.
This is a story about a “perfect storm” that nearly capsized a co-op in Queens. If you think your co-op or condo is immune, you might want to think again. What happened to Parkway Village could happen to you.
The complex — 109 low-rise brick buildings sprinkled across 37 leafy acres in Kew Gardens Hills — was built in 1947 as rental housing for workers at the fledgling United Nations. Asbestos was a common insulator then. Not until 1976 did the International Agency for Research on Cancer classify it as a human carcinogen. And asbestos encased miles of the complex’s underground heating pipes. Additionally, all 109 buildings in Parkway Village were serviced by a single boiler. When the complex converted to co-op in 1982, the 35-year-old boiler was replaced, but asbestos-laden lines remained.
Soon, the aging pipes began leaking steam so badly that the soil in parts of the complex was hot in mid-winter. High heating bills caused by these leaks kept the monthly maintenance fees rising. Disgruntled shareholders turned annual meetings into shouting matches.
Then in 1998, beleaguered board members made a catastrophic blunder: They signed a 25-year, $20 million self-liquidating mortgage with J.P. Morgan Chase Bank, at eight percent interest. If they chose to refinance, the co-op would have to come up with a $5 million prepayment penalty.
“That mortgage was a trap,” says James Samson, an attorney and partner in Samson Fink & Dubow, who was hired by the board in March 2008 to refinance the mortgage and develop an asbestos-removal plan. “Any board that takes out a mortgage for longer than 10 years should be sued for malpractice. These long-term mortgages don’t work because you can’t see what capital improvements you’re going to need down the road.”
And here’s what people who have lived there or who’ve been thinking of looking there have to say.
So much for co-ops being cost effective, and more stable than condos.