Townhouse Transactions

  • The Catalyst Team
  • 05/17/22

Townhouse Transactions by Teresa Alessandro

I. Introduction

The bulk of our transactions in NYC pertain to co-op apartments, (which are not considered actual real estate, but rather stock shares in a corporation) and condominium apartments (which are considered real property). Co-op and condo transactions have many similarities in terms of contract negotiations, due diligence and banking regulations. However, there is a third, less common, but highly coveted type of real estate transaction- THE TOWNHOUSE.

The townhouse is an ode to NYC’s rich history, as these homes were typically built during the time of the city’s formation, after the American Revolutionary War, and act as time capsules to how city dwellers lived. There’s also a whole different list of items to evaluate when buying a townhouse. One of those items is width. The wider the townhouse, the more valuable. The average width of New York City townhouses is 18-20 feet. Anything below is considered narrow (and harder to resell), anything above 25 feet is called a trophy property (or a mansion). However, width in a townhouse is about more than value. The wider the townhouse, the more air and light, the better the flow between rooms. Wider, shorter rooms are easier to furnish than longer, narrow ones.

When you buy a townhouse, you’re buying into a lifestyle—privacy, space, numerous bedrooms, gardens, and often landmarked historical details. Townhouses are the pinnacle of what a lot of people consider the very finest thing they can buy in New York City, and I am so excited to share all of what I know to help you own a sliver of one of these amazing homes.

II. How Townhouse Transactions Are Different

1) Characteristics:

a. A townhouse is similar to a condominium or a house in the suburbs being that it is real property.

b. However, townhouses are generally not part of a housing association like a condominium and are not limited in terms of conversion possibilities like a regular house. c. Architecturally speaking, townhouses can be brownstones, limestones, or brick facade. A townhouse has two parting walls on either side which are connected to an adjacent townhouse. Typically townhouses are ROW houses as they were once built in a row. The property lot size varies from 50 -120 feet deep, and have FAR (floor area ratios) assigned to the property lot allowing for additional buildable square footage in the rear of the structure or on the top of the house. Extensions are typically permissible with architect and engineering plans. Most townhouses may be landmarked, which means the exterior look and historical character cannot be changed. The rear can be changed.

2) Engineer’s Inspection:

a. An engineer’s inspection is not common in co-op’s and condominium’s due to the fact that the building is responsible for most of the mechanical systems appurtenant to a property. In a townhouse, the owner of the property is responsible for all aspects of the property. Thus you need to conduct an engineer’s report to be aware of any issues that must be addressed and the condition of the property.

3) Legal Aspects:

a. A townhouse will have its own certificate of occupancy (“CO”), unlike a condominium unit or a co-op unit where the CO covers the entire building. You should always check the CO to determine what the permissible use of each floor is in the townhouse.

b. A townhouse also has its separate tax lot, is billed separately for water, oil and/or gas and may even have its own water, oil and/or gas tanks on the premises. You will want to be aware of the annual costs of each item in conducting your transaction.

c. With the separate lot is also the separate tax bill for the house. A common issue is the assessed valuation for taxes from one townhouse to another which we will cover below

III) Due Diligence on a Townhouse.

The two main due diligence points in a townhouse pertain to a) zoning issues and your client’s intended use and b) title issues.

1) Zoning Issues:

a) Several townhouses in the City were once multi-family homes, mixed use properties or commercial properties. In converting any of these types of properties into a townhouse, you will have to obtain new CO and get the City’s approval.

b) If the building is a landmark building, you will have to get approval from the landmarks department for a conversion.

c) Purchasers who intend on buying a property and converting it to a residential townhouse or simply expanding an established residential townhouse need to be aware of zoning issues, which primarily consist of:

  • Air Rights: how many floors can you add to the current structure?
  • Floor to Area Ratio (“FAR”): If your client plans on expanding either the height of the building or the width, you will need to know what the permitted FAR is. Is the ratio of the total floor area of the building on a certain location to the size of the land of that location, or the limit imposed on such a ratio?
  • Set Back Lines: you will need to know how far you can expand your property. Each property has different rules for how close it can be to the boundary lines of the property. Each townhouse will have different lot sizes, stoop widths, and fontage. Some will have a deep front yard, while others will have a deeper backyard.
  • Classification: if your client ever desires to convert a property, you will have to be aware if it is zoned in a commercial district, if the building itself has a unique classification such a religious institution (please see the attached article from the Wall Street Journal and the transaction summary) or other unique classification which you will have to apply to the City to convert.

2. Title Issues: Title issues for real property are predominantly the same; however, townhouses being their separate entity bring about title issues similar to those of buildings or houses as opposed to condominiums.

1) Violations:

a. Townhouses often have various violations attached to them, like ECB (environmental control board) violations, sidewalk violations, etc. These violations need to be cured before a closing can take place. As a seller’s broker, you should contact your title insurance company to confirm what violations currently exist on the townhouse, the magnitude of those violations and what is required to remove them. This way you ensure that your client has or will have the sum required to remove them and there is enough time to remove them prior to closing.

2) Certificate of Occupancy:

a. You need to make sure that all alterations that have been conducted to the property that require a change to the certificate of occupancy have been completed. Also, the certificate of occupancy must be current at the time of closing.

b. In townhouse transactions (if recently renovated or newly constructed/converted) if a permanent certificate of occupancy is not in place and rather just a temporary certificate of occupancy; several purchasers will refuse to close as they do not want to assume the responsibility of completing the work to the townhouse required to obtain the permanent certificate of occupancy.

3) Survey:

a. The purchaser will need to conduct a survey reading on the property to confirm that the property does not encroach onto any other properties and is contained within its legal boundaries.

b. A seller should always retrieve their survey to deliver to the buyer prior to a deal going into contract. This avoids the delay of the buyer conducting the survey prior to the contract being signed and the contract signing being delayed as a result. 4) Party Wall Agreements:

a. Party wall agreements are common in townhouses due to the fact that they usually are adjoining another property. They stipulate the responsibility of the shared wall between adjoining properties, which is important in the event there are any structural issues with the townhouse that need to be addressed.

b. Once again, you should confirm if there are any party wall agreements and your attorney should review them prior to signing the contract.

5) Tax Assessment:

You should always retrieve the tax bills for the townhouse for the past couple of years and see if there have been any sharp increases. At times the City is inaccurate in their assessment if the property has recently been renovated or the market conditions have changed. The reason for reviewing this is that if the real estate taxes for your property appear to be higher than other similar properties, you can perhaps apply to the City (through a tax certiorari attorney) to have them reassessed and possibly lowered. This would make your property more marketable. Your attorney will also discover it the home’s zoning responds to the tax code and bill assigned to the building. If a home is being taxes at a different bracket there is a way to have the city adjust and correct the bill.

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