In a housing cooperative, what does an occupant own?
Correct Answer
B) Shares in the owning corporation plus a proprietary lease
In a cooperative, a corporation holds title to the real estate, and occupants own shares in the corporation that give the right to lease (a proprietary lease) and use a dwelling unit.
Why This Is the Correct Answer
Option B is correct because in a cooperative a corporation holds title to the real estate, and occupants own shares in the corporation. Ownership of those shares provides the right to a proprietary lease and use of a dwelling unit. The occupant does not hold real property title to the unit itself.
Why the Other Options Are Wrong
Option A: Fee simple title to the individual apartment unit
Option A is wrong because fee simple title to an individual unit describes a condominium, not a cooperative. In a co-op, the corporation holds title.
Option C: An undivided fee interest in the land beneath the building
Option C is wrong because an undivided fee interest in the land is not what a co-op occupant holds. The corporation owns the land and building.
Option D: A life estate in the unit measured by the occupant’s life
Option D is wrong because a life estate measured by the occupant's life is a different form of ownership. Co-op occupants hold corporate shares and a proprietary lease.
Co-op equals corporation shares
In a co-op, you buy into the corporation, getting shares plus a proprietary lease, not a deed to the unit.
How to use: Use this to separate cooperative ownership from condominium ownership on the exam.
Exam Tip
Fee simple to a unit signals a condominium; shares plus a proprietary lease signals a cooperative.
Common Mistakes to Avoid
- -Confusing cooperative and condominium ownership
- -Assuming a co-op occupant receives a deed
- -Ignoring the corporation's underlying financing
Concept Deep Dive
Analysis
This question tests the ownership structure of a housing cooperative. A corporation holds title to the real estate, and occupants own shares in that corporation. The shares give the right to a proprietary lease to occupy a unit.
Background Knowledge
Cooperatives differ from condominiums in that occupants own personal property, the shares, rather than real property. The proprietary lease gives the right to occupy a specific unit. This structure affects financing and how co-op interests are appraised.
Real-World Application
An appraiser is asked to value a co-op apartment. She notes that the buyer is purchasing shares in the corporation with a proprietary lease, and she considers the building's underlying mortgage and monthly maintenance charges in her comparison.
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