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Dynamax: Resources - Co-operative Ownership


Co-operative Ownership

Although rare in other parts of the United States, co-operative apartment ownership is the norm and not the exception in New York City. In NYC approximately 80% of all apartments available for purchase are in cooperative buildings, while only 20% are in condominiums. As a result of the larger inventory of co-operative housing stock, prices for co-operative apartments are generally more attractive than prices for condominiums.

Instead of purchasing the apartment outright, a co-operative buyer (a shareholder) purchases shares in an apartment corporation. The apartment corporation owns the entire building, including all of the apartments, as well as the land the building is constructed on. The buyer's shares in the corporation entitle the buyer to a long term "proprietary lease" which affirms the buyer's right to occupy a specific apartment for an essentially indefinite period of time. The amount of shares owned are dictated by the size of the apartment and its floor level. Each month the shareholder must pay a monthly maintenance fee based on the number of shares in the co-operative owned. This maintenance fee includes the shareholder's proportionate share of real estate taxes, mortgage interest on the building, employee salaries, building upkeep, etc., all of which are directly paid by the apartment corporation.



  • The affairs of the apartment corporation are managed by a Board of Directors (the "Board), which is periodically elected by all of the tenant-owners of the co-op. Since the Board has the responsibility of protecting the interests of all tenant-owners, it has the right to carefully screen and then to "approve" or "reject" any potential owner without reason. The Board usually requires every potential owner to submit a detailed purchase package, which often includes bank statements, personal and professional reference letters, tax returns, etc. Interviews of all prospective owners are almost always required as well. Qualifying standards vary from building to building.
  • Significant portions of the monthly maintenance fee are tax deductible. Each co-op building has its own tax structure, but all co-ops offer a tax advantage. Shareholders can deduct their portion of the building's real estate taxes, as well as their proportionate share of the interest on the building's mortgage. Additionally, the Shareholder's own mortgage interest is also tax deductible.
  • The amount of the purchase price that a co-op owner may finance is determined by each cooperative. Some co-ops require substantial down payments. In Manhattan, prospective purchasers of a cooperative apartment should be prepared to bring a downpayment of at least 20 to 30% of the purchase price (depending on each co-op).
  • Owners may or may not be able to sublease their apartments. Subleasing a co-op may be severely restricted (i.e., to two consecutive years only) and a request to sublease almost always must be approved by the Board. Each corporation has its own rules, which should be examined by every prospective buyer who intends to sublet.
  • "Flip taxes" are a common feature in co-operatives. This is a tax that is sometimes imposed by the co-op, and it is used to build up the corporation's capital reserve and/or to pay for improvements to a building. The Flip Tax is payable at closing by either the buyer or seller, depending upon the co-op's rules, and it is generally equal to one or two percent of the purchase price.



The figures below are presented as a guideline only. Actual closing costs will vary for every transaction. Before signing any contract, buyers should have all closing costs explained to them by their attorney and bank loan officer.

Buyer's Attorney (negotiated flat rate): $2,000±
Bank Fees (if financing): $1,600± (application, credit, appraisal, bank attorney fees, etc.)
Mansion Tax: 1% of purchase price if price exceeds $1,000,000
Lien Search: $300±
Managing Agent or Co-op attorney: $600±
Maintenance Adjustment: up to one month (Pro-rated for month of closing)
Short-Term Interest adjustment: up to one month (Pro-rated for month of closing)
Move-In Deposit or Fee: $1,000±
Flip Tax (if any): approximately 1-2% of purchase price