What is a co-op?
A "co-op," or residential cooporative corporation, is a corporation that sells shares of stock (just like any corporation). However, it differs in two major respects from an ordinary corporation: It is a non-profit making entity, and the share allocation of each apartment is based upon the relative value of each apartment to all the apartments.
What do I actually obtain when I purchase my apartment?
Every cooperative owner receives two documents which give you legal ownership of your apartment. First, shares of stock that represent your proportionate ownership interest in the Cooperative Corporation, and second, a Proprietary Lease which grants you the right to occupy your apartment.
What does the Cooperative Corporation own?
The Cooperative Corporation owns all the buildings, grounds and facilities that make up Brighton Towers, which are maintained and operated for the benefit of you and your fellow co-op owners.
Who is the landlord?
Since the corporation owns Brighton Towers, and since you are a shareholder in the corporation, YOU, together with your fellow cooperative owners, are the "landlord."
If the Cooperative Corporation is the "landlord," does it actually operate the property?
The overall operation at Brighton Towers is the responsibility of the cooperative corporation's Board of Directors. The Board is made up of, and elected annually by, you and your fellow shareholders.
Who will actually perform the work necessary to maintain the property?
Brighton Towers is currently under contract with Douglas Elliman Property Management. The professional staff of Douglas Elliman Property Management is under the supervision of Brighton Towers's Board of Directors.
How does the co-op pay for the staff and other items relating to the ownership and operation of the property?
Annually, the Board of Directors, who are elected by all of the shareholders, determines how much money will be needed to run the cooperative for the year. This amount is divided equally among all the shares of the cooperative corporation and is paid by each shareholder monthly according to the number of shares owned. This amount is your monthly co-op fee. (This monthly fee is sometimes referred to as “maintenance” - though this term is not 100% accurate, and often misleading. See below.)
What does the monthly co-op fee include?
The monthly co-op fee (sometimes referred to as “maintenance”) includes everything that, in the opinion of the Board of Directors, will be needed to operate the property for a 12-month period. Some of these expenses are those you would normally associate with the term “maintenance” such as electricity, gas, heat and hot water, building repairs, supplies, general grounds and building maintenance, water and sewer charges, security, insurance, staff salaries, and the like.
However, one of the most fundamental differences between a co-op and some other types of residential communities (i.e. condominiums) is that the monthly co-op fee also covers real estate taxes and debt service on the underlying mortgage loan, which was secured when the property was originally converted from a rental complex and purchased by the cooperative corporation. This is why we more accurately refer to our monthly fee as a “co-op fee,” rather than just “maintenance.” (See below for more details on this important distinction.)
What are the financial advantages and tax savings of cooperative ownership?
Firstly, just as with any other form of real estate, you have the ability to build "equity" in your home as you pay off your mortgage loan, if any. Obviously, were you to continue to rent an apartment, you would have nothing to sell when you decided to move, and all your rent payments will not have increased your equity at all.
Also, most notably, current tax laws permit you to deduct from your gross income the portion of your monthly co-op fee (or "maintenance") which is applied to mortgage interest and real estate taxes on the overall property, in addition to the interest on the mortgage loan which you may have on your apartment. Simply said, a good percentage of your monthly fees are tax deductible, and these deductions can considerably reduce your Federal and State income tax payments each year.
What is a Reserve Fund?
The co-op's Reserve Fund is a separate account, controlled by the Board of Directors, which is set aside for capital repair and replacement of major building systems. A Reserve Fund is kept for unforeseen (unbudgeted) emergencies. Having a healthy Reserve Fund is crucial. Obviously, the older the property, the greater the chances that the need for unforeseen repairs and/or replacements may arise. Also, any financial institution (to which the co-op might apply for capital improvement funds, for example) would require that a sufficient Reserve Fund exists.
How is co-op ownership easier than owning a private home?
For one thing, co-ops usually require less money up-front to purchase than (for example) condominiums. This might mean that you are in a better position to buy your own home than you may have otherwise thought. Also, just as you would expect, co-op ownership frees you from the chores of exterior maintenance and repairs, landscaping, groundskeeping, snow removal, etc., just as owning a condo would.
Can I renovate my own apartment?
You, as an owner, have the right to renovate your own apartment to suit your own needs and lifestyle. Of course, no structural walls may be removed. All plans, other than painting or other interior decorating, must be submitted to the Board of Directors for approval, and all work must be performed by licensed and insured contractors. This provision protects you, as an owner, as well as prevents any damage to the property done by any other owner who wishes to remodel his or her apartment.
Can I sell my apartment?
You, as a shareholder, have 100% equity in your apartment and you may sell your apartment at the highest price obtainable, and all of the proceeds of the sale are retained by you. Having said that, each sale must be approved by the Board of Directors, basically to assure the credit-worthiness and general acceptability of the new purchaser, for the benefit and protection of all the cooperative corporation’s shareholders.
Who sets the sales price of my apartment?
You set the selling price of your apartment, based upon the current market value of the apartment, the size of the apartment, its location, and the improvements that may have been made to it, as well as its general condition. You have the right to sell it yourself or employ the services of any licensed real estate broker.
For more information about co-ops, visit the National Association of Housing Cooperatives' website at www.coophousing.org.
NOTE: The above explanations have the simple objective to acquaint you with cooperative living. As such, this FAQ deliberately avoids a detailed, in-depth discussion of cooperative ownership. For complete details regarding Brighton Towers, it is advisable to read its Offering Plan, as well as its accompanying amendments and other documentation such as the Proprietary Lease.