Coops/Cooperatives - New York Mortgage

Cooperative, or coop, is a form of real estate ownership. This type of property ownership is
mostly found in large metropolitan such as New York City. A cooperative is usually a
multi-story building with many individual units, or apartments, although it can also be row
houses in a planned development. The owner of the building and the land it is built on is a
corporation, called cooperative corporation. Each coop unit is allocated a certain number of
shares, or stocks, in the cooperative corporation. When one is said to purchase a coop unit,
he does not actually purchase an apartment. Instead, he purchases the number of coop
shares that is allocated in the apartment. Along with the shares, the purchaser is also given
a proprietary lease to occupy the unit.

Coops have an "Offering Plan", which contains all the information about the cooperative
corporation, including the number of units, the number of shares allocated for each unit, any
rules or "bylaws" such as whether the shareholders are allowed to keep pets, or whether they
plant flowers on the front lawn.

Each Coop building has a "coop board". The board members are current shareholders
(residents) of the coop. When a person purchases a unit in the coop, he is interviewed,
eventually approved or denied to be accepted in the coop. The coop board evaluates a coop
purchaser based on his sufficient income, suitable number of family members in relation to
the coop unit, and other coop "bylaws", which governs how the coop is operated. If a
purchaser is not approved, he is not allowed to purchase the coop unit.

Coop share owners pay a monthly maintenance fee. This fee is used to pay for real estate
taxes, building improvements and other building maintenance, such as snow removal in the
winter and lawn care in the summer.

Many coops impose "flip taxes" on coop sellers, but usually if they sell within a certain amount
of time after they bought the unit shares. Flip taxes are collected by the cooperative
corporation and are used for improvement and maintenance.

Coop corporations report their financial situations in their annual financial statements. In
addition, any changes in the Offering Plan, such as change in share prices, are reported in
the Amendments to the Offering Plan. All coop shareholders are entitled to the financial
statements and the Amendments.

Although many banks do not make mortgage loans secured by coops because of the nature
of the way the property is owned, some banks specialize in coop mortgage loans. Because
there is an additional attorney representing the coop corporation and more coop specific
documents involved, the coop mortgage process is a little more complex and lengthy. In
addition, some banks charge a little higher interest rate.










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