What is a cooperative?  Kiritsis Law Group 212 922 0005

May 13, 2021

By: John Kiritsis, Esq., CPA, MBA, MS, JD, LL.M

A multi-unit property structure owned by a one cooperation, whose stock is owned by individual shareholders that entitle them to a proportionate right to use individual units, along with a proportionate debt obligation, encumbering the entire property in accordance, with their stock ownership percentage. A good way to understand the term cooperative, is by highlighting the term ‘co-op’, as a way of describing a housing occupancy arrangement, not based on an individual’s property ownership rights, but rather by a cooperative’s right to provide occupancy to fee-paying members. My experience has shown that most clients prefer to own a condominium, as opposed to co-op, because of the sentimental (and often practical) implications of owning a piece of the actual real estate. However, there may be situations where coop ownership, could be superior to condo ownership. For example, let’s say a stock market crash leads to a liquidity crisis. During a cash crunch, owners will have a hard time refinancing on their mortgages. By himself, a single condo owner battling a big bank on a foreclosure action. However, a coop may be in a better position to negotiate with a bank, based on the notion that there is strength in numbers.

 

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