Nadel & Ciarlo, P.C.

New York apartment co-ops offer an alternative to home buyers


There are many options for New Yorkers looking for residential property. One residential real estate option distinctiveto New York City is the cooperative apartment. In a cooperative, the entire building is owned by a corporation. Instead of a deed, you buy shares in the corporation. As a shareholder, you are then entitled to enter into a lease of an apartment unit in the building.

Shares in a co-op are usually purchased by means of a share loan, which is similar to a mortgage. Shareholders make a monthly payment which includes a payment on the share loan, as well as a payment for their pro rata share of utilities, insurance and other bills incurred for the building. Since co-ops are operated on a cost basis, they can be financially more appealing to many buyers.

The share loan is distinct from the mortgage held by the corporation on the building itself. Thus, a co-op apartment shareholder may be required to include a contribution to the overall building mortgage in their monthly payment, even if they have paid off their share loan in full.

Larger co-ops are managed by a volunteer board which is selected from the shareholders. In smaller co-ops, all residents may take part in managing the co-op and addressing maintenance and other issues.

Co-ops are not for everyone. Those who live in a co-op building must be able to get along and work with their neighbors, who are co-owners of the corporation. Co-ops usually have rules regarding membership. Although they must comply with federal and state fair housing laws, they can be more selective when it comes to the financial resources of prospective members. Credit and background checks are commonly required.

Source: Investopedia, "Housing Cooperatives: A Unique Type Of Home Ownership," Lisa Smith, accessed Nov. 1, 2014

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