Curbed University delivers insider tips and non-boring advice on how to buy, sell, or rent a home or apartment. Additional questions welcomed to email@example.com. Up now, sponsor units!
Today's Curbed University lesson is a quick one, but may prove informative nonetheless: We've all encountered the occasional sponsor unit while perusing apartment listings, but what a sponsor unit actually is has remained one of life's great mysteries. Well, not any more! A sponsor is the person or legal entity responsible for developing a new building or converting a building to a co-op, and a sponsor unit is an apartment bought directly from the sponsor, meaning that the purchaser of the sponsor unit is that apartment's first owner. Sound good? Good. There are a few key differences between sponsor units in a co-op and a condo.
"When many rental buildings went co-op in the 1980s ... since most plans were non-eviction plans, the sponsor would renovate each unit that became available and sell it. To this day there are occasional sponsor units in a co-op, and that is generally because the renter who has been hanging on for a very long time is no longer occupying it," writes broker Jenet Levy. The advantage of buying a sponsor unit in a co-op is that you get to bypass the board interview. However, it is likely that you will have to pay the seller's transfer tax (usually around 1.5-2% of the purchase price.) And even though you got in with no board interview, once you're in you'll still have to abide by the rules of the co-op in regards to subletting and other co-op policies.
Nowadays, rental conversions are usually into condos, not co-ops. In a condo, the sponsor is the developer. You will probably be able to get a better deal on a sponsor unit in a condo than on a unit that is being resold, but, as with the co-ops, you will also probably be obligated to pay the closing costs including seller's transfer tax and possibly the sponsor's lawyer fees as well.