In a cooperative, the building, land, all real property rights and interest are owned by a corporation in severalty. The title to the property as shown on the deed is in the name of the corporation. Once you purchase within a cooperative building you are now known as a shareholder. The shareholders have the right of occupancy as evidenced by a proprietary lease, which is usually an estate for years or for a long period of time. Thus ownership in a cooperative is really ownership in shares of stock in a corporation. The common areas such as the roof, lobby, elevator, hallways, etc., are owned by the corporation.
Cooperative shareholders pay a monthly maintenance share which is rent to cover the cost of maintaining and operating the building, real property taxes, heat, hot water, and debt service if the corporation has an underlying mortgage.
Co-op Purchase Process:
After the broker has helped the buyer and the seller agree upon a price, the steps to take are as follows:
1. Fact sheet
(Broker prepares) consist of, Buyer and Seller’s names, address, social security #, Attorney name and address, number of shares purchasing, closing date, amount financing, Broker’s information.
Buyer’s attorney will have the opportunity to read minutes and financials of corporation. Seller’s attorney will prepare contract and send out to Buyer’s attorney. The Buyers signs the contract and gives a deposit of 10% of the purchase price. The seller will in turn sign the contract and deal is binding. Note; there is no binding deal until the contract is fully executed (signed by both parties).
Buyer should have this in place and have been pre-approved already. A commitment letter from the bank will be needed for the board package. You will also need a Aztec Recognition Agreement, forms that the bank requires the corporation to sign stating the corporation recognizes the bank’s interest in the property.
4. Board Package
You will receive a packet, they vary from each corporation most require the following information; Net worth statement, verification of assets, employment history, tax returns last 2 to 3 years, Credit report, personal and business reference letters, plus forms from the corporation, Bank commitment letter (if financing). Copies are made and then handed to the Managing Agent who then hands out to the Board of Directors to review.
5. Board Interview
Boards usually meet once a month, so the interview time is not an exact science for your broker to know. The interview last between 30 minutes to 1 hour. The managing agent will then inform the Attorney or Seller’s Broker if approved.
The attorney’s, bank and managing agent set a date for closing. The buyer will do a walk through prior to the closing.