Sellers / Purchasers - Coop

SELLERS/PURCHASERS COOP NEW YORK

A purchaser of a coop does not buy real estate, but shares of stock in the corporation which holds the title to the real estate. In addition to the shares of stock a coop Purchaser receives a “proprietary lease” which allows the Owner to occupy a specific apartment. The shareholder pays a monthly maintenance fee to the cooperative corporation based upon the number of shares he or she owns, which fee all building and management expenses including taxes, insurances, mortgage, repair costs.

Financing is usually available for most coops and a complicated board approval process follows a receipt of the coop financing for the Purchase. The only lucky Purchasers which do not require a board approval are the ones buying directly from the sponsor. A coop Board of Directors are able to accept or deny buyers without disclosing any reasons for rejection. Typically the better the building the tougher the standards of approval are, but there are some exceptions. Purchasers are usually required to provide personal financial information, including one or two years of tax returns and bank statements, as well as personal and business reference letters, to the Board of Directors. Following the receipt of the board application and supporting financial information and references, the applicant is typically interviewed by the building's Board of Directors.

Coops vary in its rules as to how much financing a prospective tenant/shareholder may assume. It can be as little as ten percent or as much as fifty percent.

A portion of maintenance charges that a shareholder pays monthly can be tax deductible, usually real estate taxes and interest charges on the building's underlying mortgage. These percentages may vary. The interest on the shareholders loan is also tax deductible.
In the event the shareholder is planning to sublease the apartment, a careful review of the offering plan and the house rules, and policies should be conducted prior to Contract signing. Many buildings limit such subleases or require the subleases to be of a certain time period, such as one year.

“Flip taxes” and other management fees are a common in coops. The tax, imposed by the co-op, is used to establish a reserve fund to pay for improvements to the building. The tax usually depends on the purchase price, usually is payable by the seller but can sometimes be imposed on the purchaser as well. In some rare instances a flip tax imposed is equal to a certain percentage of gain received by the Seller from the transaction.

Transfer taxes, some Purchasers of sponsor owned units may be required to pay transfer taxes, which are usually imposed on the Seller.