Cooperative
A cooperative, or “co-op,” is a form of residential or business property ownership in which individuals own shares in a corporation that owns the property. Unlike other forms of property ownership, such as individual freehold ownership or condominium ownership, no one in a co-op owns the property directly. Instead, ownership is through shares of stock in the corporation, coupled with a proprietary lease that grants the shareholder the right to occupy a unit in the property.
Examples
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Residential Cooperative: A brownstone building in Manhattan is converted into a cooperative. Each resident buys shares in the corporation owning the building proportional to the size of their apartment. These shares entitle them to live in their respective units.
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Retail Cooperative: In some small towns, local businesses band together to purchase large buildings and convert them into retail co-ops, where each business owner has shares in the corporation and the right to operate out of their portion of the property.
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Senior Housing Cooperative: In suburban areas, senior housing developments may adopt a cooperative model. Residents buy shares, which allow them to live in and often manage their apartments collectively, ensuring lower costs and community involvement.
Frequently Asked Questions (FAQs)
Q: What is the primary difference between a cooperative and a condominium?
A: In a cooperative, you own shares in a corporation that owns the entire property, and these shares grant you the right to occupy a unit. In a condominium, you own the unit directly via a deed.
Q: Can I sell my shares in a cooperative?
A: Yes, you can sell your shares in the cooperative, which usually takes place with the transfer of the proprietary lease to a new shareholder.
Q: Are there financial benefits to owning cooperative shares?
A: Yes, cooperative shares can offer financial benefits such as deduction of mortgage interest and property taxes on your income tax return.
Q: How are monthly fees determined in a cooperative?
A: Monthly fees are determined according to the expenses of the entire property, which includes maintenance, operational costs, property taxes, and any loan payments for the building.
Q: What is a proprietary lease?
A: A proprietary lease is a lease agreement given to each shareholder that allows them to occupy their unit in the cooperative.
Related Terms
- Proprietary Lease: A lease granted to a share owner in a cooperative that outlines the rights and responsibilities for occupying a specific unit.
- Condominium: A form of property ownership where individuals own their individual units outright and share common areas with other owners.
- Shareholders: Members who have bought shares in the cooperative’s corporation and thereby gained the rights to occupy a unit.
- HOA Fees: Regular payments by homeowners to maintain common areas in residential properties, often seen in condominium ownership.
- Common Areas: Spaces in residential buildings or complexes that are shared among all residents. Common areas are maintained through service fees paid by the property owners.
Online Resources
- National Association of Housing Cooperatives (NAHC)
- Cooperative Housing International (Middle-income
- Publications for Cooperative Members
References
- Rogak, Lisa Iannucci. The Complete Guide to Owning a Co-Op.
- National Association of Housing Cooperatives. (Best Practices in Cooperative Housing Management).
Suggested Books for Further Studies
- Gleitman, Marilyn, and Lisa Holdworth*. The Co-Op Bible: How to Buy Shares in A Cooperative.*
- Kass, Morton R., Edwin S. Robison, II, and Diane Kennedy*. Co-ops: A Guide to the Finance and Operation of Cooperative Ap Association (Boards).*
