I think I was well into adulthood before I heard the term “housing cooperative.” I knew about farmers’ cooperatives because I grew up just a block away from the Cheboygan Co-op, where my Dad could buy eggs on the same day they were laid, and from which we kids were regularly shooed away by workers trying not to drop bags of seed on our heads.
Like a farmers’ cooperative, a housing cooperative enables its members to leverage their buying power by pooling their resources. Unlike a farmers’ cooperative, which typically purchases, stores and distributes farm implements and products, a housing cooperative owns residential real estate in which its members live.
A housing cooperative is usually a corporation which owns a building or buildings that look to the casual observer like apartment buildings. People who wish to live there purchase shares in the corporation and receive, in return, the exclusive right to occupy an “apartment” in one of the buildings.
Housing cooperatives are often confused with condominiums. Indeed, I have had clients come in over the years believing that they own a condo when, in fact, they own shares in a cooperative. True, the two are similar in several respects: Both involve multiple housing units, common areas, bylaws, governing boards and monthly fees. A condominium owner, however, holds title to real estate. A cooperative member, on the other hand, holds a lease or occupancy agreement for an apartment, while the cooperative itself holds title to the real estate.
So why would someone want to buy into a housing cooperative as opposed to a condominium? Most attractively, co-op apartments are usually less expensive than comparable condo units. Also, housing cooperatives have the limited ability to screen, and even to exclude, prospective buyers. A prospective buyer may be asked to prove, for example, a minimum net worth, or to submit to a background check. Another distinction is that smaller cooperatives are sometimes governed by all the members rather than by a board of directors, which some find appealing. Others like the fact that subletting is not allowed.
There are many other differences between cooperative and condominium living — some large, some small. And all of which should be considered when contemplating the purchase of an apartment titled in a housing cooperative.