Co-op in NYC | What is a co-op apartment?

You’ve probably heard the term condo before and you are wondering what the difference is between condos and co-ops. The concept seems to be the same. You own an apartment in a multi-unit building and you share all the common areas with other residents. Both condos and co-ops can be large buildings with a few hundred units and both of them can be small buildings with less than 5 units. The difference is not the size or the aesthetics of the building. The difference is the type of ownership.

When you buy an apartment in a co-op building, you are buying in a cooperative corporation. The corporation owns the entire building. In this case, the real property is the entire building, not your apartment. Inside this building, each apartment is allocated a specific number of shares. For example apartment #3A has 425 shares. Similar to the concept of shares in a traditional stock market. Shares represent a portion of the stock in a corporation. When you buy shares say, in a company called Pineapple, you become a shareholder of Pineapple. Now you own a piece of that company and it’s the beginning of your shareholder era.

The number of shares that are allocated to each apartment usually depends on the size of the apartment. The larger the apartment, the more shares it has in relation to the other apartments in the building. In some co-ops other factors like floor height or even apartment position can also influence share distribution. But mostly the size remains the predominant factor. The share allocation for each apartment was established when the co-op was initially built or converted from a commercial or rental property to a cooperative. Let’s say you bought apartment 3A in 123 Example Street co-op. As we’ve talked about it earlier, unlike condos, here you didn’t buy the actual apartment 3A. You bought as an example 425 shares associated with apartment 3A. So, you now hold a stock certificate which proves your ownership of 425 Shares in the 123 Example Street corporation.

At this point, you might be wondering, if apartment 4A which has the exact same floor plan, also has 425 shares can you just decide to live in 4A instead of 3A? And the answer is no. The reason you can’t just pick any apartment that has 425 shares and switch is due to something called a proprietary lease. This document specifies that you are entitled to occupy apartment 3A and not any other unit in the building. It’s an agreement between you as a tenant-shareholder and the corporation which acts as your landlord, according to which the co-op allows you to occupy your specific apartment in this case 3A in perpetuity as long as you continue owning those shares. The proprietary lease is an important document that governs the relationship terms between you and the co-op. So in co-ops instead of a deed and title, you will get a stock certificate and a proprietary lease.