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Cooperative ownership is a form of apartment ownership arrangement whereby a tenancy in common, corporate business or trust entity acquires title to certain property (an apartment building), and grants to the stockholders of the entity certain rights of occupancy (proprietary leases) to particular apartments located within the building acquired by the entity.
Three distinct plans may be used in structuring a cooperative:
Of all the above plans, the corporate-proprietary lease is the most commonly employed in the organization of a cooperative apartment.
Under this plan, prospective purchasers of apartment ownership are offered shares of ownership in a corporation. Once acquired, these shares entitle their owners to a proprietary lease of a specific dwelling unit located on the property owned by the corporation.
Local law must be researched in order to determine whether the owner's interest in a cooperative apartment ownership is an insurable interest in land.
If determined to be insurable, two possible forms of title insurance may be considered:
In this connection, it should be noted that:
When insuring a mortgage of the lessee's interest, always:
Because of the extreme complexities surrounding the insurance of a co-op apartment, it is advisable not to offer any kind of extended coverage when insuring a cooperative apartment ownership.
Carefully examine the contents of the charter and bylaws of the corporation, the cooperative declaration and any other related documents to ascertain the need to make any requirement or raise any exception as a result of their provisions (consents, approvals, etc.).
When insuring a co-op apartment, a search should be made for filings under the Uniform Commercial Code to determine that the stocks or shares in the cooperative corporation have not been assigned as a security for any loan.