The Housing Co-Operative (Co-Op) is a legal entity that owns real estate through a specially formed Corporation, in recent years the LLC has replaced the corporate structure. The Co-Operative form of housing differs from the Condominium form of ownership differs in a major way. When purchasing a Condominium, you are actually purchasing a unit a building or complex and becoming a member of a Condominium Association that is responsible for the maintenance and service of the common areas of the building or complex. As a buyer of a Co-Op, the purchaser is buying shares in a Corporation or LLC that owns the building or complex. The shares that are purchased when buying a Co-Operative entitles the buyer to occupy an apartment in the Co-Op. Most Co-Ops are purchased with the intent of living in the building; however there are investors who buy Co-Ops that have no intention of occupying a unit.
The Co-Operative Form of Housing differs from a Condominium in that the purchase of shares in the Co-Op makes the buyer a partner in the building, not just a member of a managing Association as with the Condominium. The Co-Operative form of housing is run as a Corporate Structure, with an elected Board of Directors who represents the shareholders. The amount of shares purchased by each buyer is determined by the percentage of the square footage that their apartment or unit represents as a percentage of the entire building. As with all Corporations and LLC’s one share equals one vote, so that the percentage of shares owned s the percentage of control that you have over the decisions made by the Board of Directors in terms of how the building is maintained and managed. Your liability for expenses is commensurate with the percentage of shares that the buyer holds in the Co-Op.
Co-Operative living means that when you buy shares in a Co-Op, you are becoming a partner with the other shareholders of the building or complex, that is why purchasing a Co-Op entails approval of your purchase by the Board of Directors, and your sale of your shares when you want to sell are also subject to approval by the Board of Directors. Just because a buyer has the funds to purchase the shares that represent a unit in the Co-Op it does not automatically mean that the purchaser will be accepted by the Board of Directors to be a Share Holder in their Corporation or LLC. Co-Op Boards usually engage in a lengthy approval process that includes looking at the potential share holder’s assets as well as their life style. Each Co-Op has its own specific requirements for purchasing shares in their building or complex. Some Co-Ops may prefer only families, some only career oriented people, and some only retired shareholders. When the Board of Directors accepts your application to purchase shares in their Co-Op, they are accepting you the buyer as a partner in their Corporation or LLC. A potential Co-Op purchaser should be prepared for a very in depth interview process, that will include your financial statement, personality, and lifestyle, you are not just buying an apartment, you are being accepted as a partner by existing share holders of the Co-Op.
The New York Co-Operative Form of Housing dates back to the 1920’s and blossomed because of strict rent control laws. With rent control many large Manhattan Buildings became unaffordable for owners to maintain, the Co-Operative form of ownership was an appealing alternative. The biggest boom in Co-Operative conversions came to Manhattan in the 1980’s with the larger buildings that were built from the 1920’s to the 1950’s becoming the most appealing to convert. As a Corporation the Co-Op has the leverage to obtain large scale financing for major repairs and renovations which were needed when converting unprofitable rental units into Co-Operatives.
Today in 2011, the Manhattan Co-Operative form of housing is still thriving in Manhattan and especially in older neighborhoods that are becoming the hot neighborhoods to live in, such as the edges of China Town and in FIDI. Throughout FIDI there are Co-Operative conversions already under way with a stock of older buildings that are ripe for Co-Operative conversion. When considering moving to Manhattan’s hottest new residential area, FIDI, a Co-Op might be a viable alternative. Those that are already leasing in FIDI and realize that this is the neighborhood that they would like to stay in for the long term, the process of applying for a Co-Op should be started at least six to nine months before your lease runs out to be sure that you will have enough time to provide the Board of Directors of the Co-op all the necessary material they will need to accept you as a partner in their corporation. If you are living in another part of NYC or New Jersey and have been eying the thriving life style offered in FIDI, contact a reputable FIDI Real Estate Agent to guide you to the Co-Op that may be the right one for you. The benefits of Co-Op living are that your living expenses are also an investment with the possibility of a good return on your equity should you decide after years of living in FIDI. The downside of Co-Op living is that your financial and personal house must be in order to meet the sometimes grueling interview process to be accepted as a partner in the Co-Op. The Board of Directors will establish rules and regulations for the building, and the innate Corporate Structure of a Co-Op can lead to personality conflicts with other partners in the building or complex, however, the in depth interview process is also favorable to you, the purchaser, for throughout this process you will also get an in depth feel for the people you are joining in the purchase of you Co-Op Shares. Co-operative living is one of the living choices in the revitalization of FIDI, and may be the right choice for you to become a part of Manhattan’s hot new living experience.