What is a Cooperative (Co-op) Apartment?
A cooperative apartment is an apartment in a building owned by a cooperative corporation which is leased to the shareholders of the corporation. Cooperatives must go through a special process known as a public offering before they can issue leases and shares to tenants in the building. The public offering process is regulated by state and sometimes federal securities regulations. A cooperative corporation is typically created when a real estate developer purchases a parcel of land, builds a multiunit building or modifies the existing building, and sells the land to a corporation. That corporation then sells shares to and issues proprietary leases to tenants. Cooperative certificates of incorporation and bylaws typically require that all lessees be shareholders. Therefore, the stock and proprietary lease are considered appurtenant to each other. General Business Law 352-e through General Business Law 352-eeee is where most New York state securities laws concerning real estate cooperative offerings is located.
What is Stock to a Cooperative Apartment?
The stock or shares to a cooperative are just like any other business corporation except restrictions apply to purchasers. Most cooperatives are New York Business corporations, however, some not-for-profit and cooperative corporations exist, which do not issue stock. Not-for-profit and cooperative corporations may issue certificates of membership instead. Stock certificates issued by business corporations typically state there are restrictions on the transfer or sale.
What is a Proprietary Lease?
A proprietary lease is the long term lease a shareholder of a cooperative corporation signs. Typically a person cannot be issued a proprietary lease unless the person is also a shareholder. Proprietary leases are similar to traditional long term leases, however, they also contain provisions relating to voting, rent is actually a maintenance payment for building expenses, and they establish unique assignment and transfer provisions.
Can you get Title Insurance for a Cooperative Apartment?
Because the owner of a cooperative apartment does not actually own any land or the building, title policies are not available. However, title companies do issue two types of policies to protect the buyers interest in the stock and lease, Eagle 9 policies and TIRSA cooperative endorsements to traditional title policies. Eagle 9 policies are typically less expensive than TIRSA policies, however, many people forgo title insurance for cooperative units, especially if no lender is involved.
