Co op shares are units of ownership in a cooperative corporation that owns an apartment building,
not unlike owning shares in a regular business corporation.
The coop corporation’s main asset will typically be the apartment building, and thus each shareholder
will own a piece of it.
Coop shares come with a proprietary lease that entitles the shareholder to occupy a
specific apartment which they have de facto ownership of.
Coop shares can be bought and sold, and thus coop apartments can be traded just like condos
or townhomes.
What Is a Coop Apartment?
A coop apartment is an apartment in a coop building that a shareholder has an indefinite
right to occupy, despite the apartment being actually owned by the coop corporation.
However, the coop corporation hands out proprietary leases along with stock certificates for specific
apartments, and these proprietary leases essentially allow a shareholder to occupy that apartment
indefinitely.
Differences Between Coops and Condos
The major differences between coops and condos are the ability to rent out the apartment
and purchasers needing board approval.
Coop boards also have more power vs condo boards, and are more empowered to fine, discipline
and even foreclose on shareholders.
Whereas a condo board may not be able to do much more than place a common charge lien
on a delinquent owner, a coop board can swiftly foreclose on a shareholder who is behind on
maintenance charges.
Are Coop Apartments Real Property?
Coop apartments are not real property because the apartment along with the rest of the apartment
building is owned by the coop corporation.
As a result, coop shareholders are technically tenants who have a proprietary lease that
enables them to reside in “their” apartment essentially indefinitely.
What Is a Coop Shares Stock Certificate?
Coop shares are similar to the deed for a house or condo, except you are given a stock
certificate vs a deed at closing.
The stock certificate will state the name of the corporation, your name, how many shares
you own and other miscellaneous information.
Can You Borrow Against Coop Shares?
Yes, you can borrow against coop shares and get the equivalent of a home mortgage.
Instead of a deed as collateral, the bank will take your coop shares stock certificate
and proprietary lease as collateral for the loan.
Please note that while lending against coop shares is very common in the NYC real estate
market, lenders from other parts of the country will generally be unfamiliar with this type
of collateral.
As a result, if you are based out of state and buying in NYC for the first time, it’s
imperative that you work with a locally based mortgage banker on your financing.
Working with an out of state mortgage banker, even if he or she works at a major, nation-wide
lender can cause significant delays in your purchase and closing process.
How Are Coop Shares Allocated Between Apartments?
The Martin Act of 1921 ensures that coop shares are allocated fairly between different apartments
in a coop building based on reasonable metrics such as square footage and which floor the
apartment is on.
Before the passage of the Martin Act, there were shockingly no rules around how coop shares
could be allocated between shareholders with different apartment sizes and configurations
in a building.
This lack of regulation resulted in much abuse by developers who often retained large penthouse
apartments for themselves, but paid much less in monthly maintenance fees vs ground floor
studio apartment owners.
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