What is a Co-op?A co-op apartment is a unit of housing that a person is allowed to occupy after purchasing shares in the corporation that owns the cooperative.
Instead of actually buying the property, the resident is a shareholder in the corporation and has a proprietary lease to occupy their apartment.
To buy a co-op apartment, each new potential shareholder is interviewed by the Board of Directors, comprised of a group of elected shareholders in the building and chaired by the Board President.
Due to the complexity involved in putting together an application package for the board as well as scheduling the interview, it typically takes a minimum of two to three months from offer to close.
Co-op boards have the legal right to pick and choose their neighbors and do not have to inform applicants of the reason for any rejections. The co-op board also determines how the building is managed and has the ability to approve assessments on the property to pay for additional expenses.
The biggest benefit of living in a co-op is that the relationship between the board and the resident is that of a landlord-tenant, so you have all the rights of a tenant under New York State law.
Under the same warranty of habitability extended to renters, co-ops are responsible for providing heat and hot water on a regular basis and shareholders have the right to a livable, safe and sanitary apartment. This means that as a shareholder, you can withhold maintenance payments if the building heat goes out for a few days.
Co-ops also have lower closing costs than condos because the underlying building mortgage does not have to be refinanced each time a unit is transferred.
8 Things to Remember When Buying a Co-op:
- Apartment value factors including size, the floor, the views, exposures, and other various features of the home will be represented by owning more shares in the corporation
- The larger the apartment and the higher the floor, the more shares you own in the corporation.
- You will receive a proprietary lease to represent ownership of the unit. A proprietary lease is a written lease in a co-op building between the owner of the corporation and the tenant stockholder that gives the tenant the right to occupy a particular unit.
- Monthly charges (called “maintenance”) include: upkeep, insurance, staff salaries, real estate taxes, and mortgage debt of building.
- Board approval an be lengthy
- There will be a co-op mandated minimum downpayment
- Cannot buy as an LLC to shield identity
- Restrictive sublet policies