What is a Pied-a-Terre?
A: In terms of NYC real estate, a pied-a-terre simply refers to the idea that you will be using an apartment as your second home or for temporary lodging.
The reason this is important is because there are a lot of people out there that would like to buy an apartment in Manhattan for that very purpose. The problem is that if you plan to get more space for your dollar via buying a Co-op instead of a Condo, chances are there will be some type of board policy restricting the use of the property as a pied-a-terre. Co-ops usually restrict the use of a property as a pied-a-terre to protect the corporation against possible future distress of the seller (since a 2nd property is more of a financial strain and the most likely asset to be liquidated in hard times).
But how will the board know I plan to use the apartment as a pied-a-terre? Co-op boards have gotton very smart these days with the housing market booming as it has over the past 4 years. To protect their own interests, a co-op board will most likely ask you to submit:
1. Last 2 YRS Tax Returns
2. Last 2 Pay Stubs
3. Complete Financial Analysis of Assets & Debts (w/ Hard Copy)
4. Bank Statements
5. Letter from Employer
6. Letter from Bank
If the booard sees that you own another property that is listed as your primary residence on your tax return, they will begin to question your intended use of the apartment. Even if you cover your tracks and answer their questions perfectly at the board interview, you still can get a Board Rejection and lose the deal.
The important thing to note is that Co-op boards are representative shareholders of the private corporation. They can pretty much do what they want to protect their own interests as long as they are not discriminating; and even that it is very hard to prove in a lawsuit.
If you plan on using your property as a pied-a-terre in New York City, than do 1 of 2 things:
1. Buy a Condo
2. Find a Co-op that allows Pied-a-terres
...you will be restricted if you can only afford to buy a Co-op, so be sure to do your homework first and see if the board policies meet your needs before submitting any offer and starting the transaction process!