Property Rights Conveyed for Co-Op

[Roger Hudson]

What form of property ownership is a co-operative apartment. Is it fee simple or something else. I cannot find the answer in either the "The Appraisal of Real Estate" or "Residential Properties" from the Appraisal Insititute.

AG

 

[Hal Mann]

Cooperative ownership is not a real estate interest. It is ownership of shares in a corporation which has a fee simple interest in a property. Title is conveyed by means of a proprietary lease to the coop unit (whether residential or commercial space).

I have seen some folks call this a leasehold interest.

 

[Don Clark]

It is an interest in real estate. You buy stock in a corporation that gives you the proprietary right to occupy a unit owned by the corporation. That is legally an interest in real estate and must be appraised by a state licensed or certified real estate appraiser.

 

[DB]

Man ... our Co-op only has feed and fertilizer ...

 

[Hal Mann]

From The Dictionary of Real Estate Appraisal, 3rd edition:

"Cooperative apartment unit: An apartment in a building owned by a corporation or trust, in which each owner purchases stock representing the value of a single apartment unit and receives a proprietary lease as evidence of title. Ownership is considered personal property, not real property".

 

[Lee Lansford]

From "The Appraisal of Real Estate", 12th Ed., Appraisal Institute, p. 78:

"cooperative ownership: A form of ownership in which each owner of stock in a cooperative apartment building or housing corporation receives a proprietary lease on a specific apartment..." etc.

 

[Don Clark]

Since the stock has real estate as it's basis, then it is an "interest in" real estate. I sat through a case before our state appraisal board where an appraiser had completed an appraisal of a unit in a coop. His attorney tried to argue that since it was not real estate then the state license law did not apply. Our state board ruled that the state laws and regulations concerning real estate appraisers, and the license law did apply since ther stock created an "interest in" real estate. does not matter how minor the interest is, it is still an interest. The same people who write these dictionaires still have the definition of a condo wrong as well. A condo is a form of ownership. Their definition only defines a condo unit in a high rise. I can show them at least 20 condos in my market where that definition is all wet.

The interest in real estate may be minor, and an undivided share but it is still an interest. Try telling your state appraisal regulators that you don't need a license to appraise a coop.

 

[Hal Mann]

I certainly would agree that one needs a license to appraise a coop.

And while that state board can use the convenient fiction that it is real estate to support that requirement, the fact is that a coop is not real property. Despite that legal fiction, in most jurisdictions that record real estate transactions, coop transfers are not recorded. And just like a condominium, a coop is a form of ownership, not simply an apartment owned through a proprietary lease. While fairly rare in my experience, there are commercial coops as well as residential ones.

I'm not sure what dictionary you might be referring to. While there is plenty of confusion amongst appraisers about what a condominium is (as regularly evidenced here on the Forum), my Dictionary of Real Estate Appraisal, first edition, 1984, clearly states that a condominium is a from of fee ownership.

 

[Don Clark]

Hal,

To be clear. The ownership in a coop is not ownership of real estate but an "interest in" real estate. The corporation owns the real estate, the stockholder owns stock in the corporation. It is an interest in real estate. No the same as ownership of real estate.

http://en.wikipedia.org/wiki/Housing_cooperative

We are saying the same thing. However, most state regulations regarding who should be licensed would require a real estate appraiser to appraise a coop due to the interest in real estate.

 

[Howard Klahr]

Does the same logic follow for ownership of REIT investments - stock ownership whereby corporate entity owns the real estate?

In reference to properties encumbered by a cooperative declaration the individual ownership interests are in fact shares of stock in a corporation (personal property) that include occupancy rights within the property. Transfers of cooperative interests are not recorded in the public records nor are these forms of property assessed for taxes as real estate but rather personal property.