CONDOMINIUMS AND COOPERATIVES

CONDOMINIUMS AND COOPERATIVES

Two common forms of multiple-unit dwellings, with independent owners or lessees of the individual units comprising the multiple-unit dwelling who share various costs and responsibilities of areas they use in common.

A condominium is a multiple-unit dwelling
in which there is separate and distinct owner-
ship of individual units and joint ownership of
common areas. For example, in an apartment
house, the individual owners would each own
their own apartments while all the owners of the
separate apartments would together own the
parts of the building common to all of them,
such as the entrances, laundry rooms, elevators,
and hallways. The building is managed by the
condominium association, either directly or
through a professional manager. The owners of
the individual units are jointly responsible for
the costs of maintaining the building and com-
mon areas, but they are individually responsible
for the maintenance expenses of their particular
units.

A cooperative apartment house is usually
owned and managed by a corporation, and the
shareholders are tenants who lease their apart-
ments from the corporation. The relative size of
the apartment that a shareholder-tenant leases
determines the proportion of the corporation’s
stock that that shareholder owns. Each share-
holder-tenant pays a monthly assessment, based
upon his or her proportionate share of the stock,
to cover the principal and interest on the build-
ing mortgage, taxes, and maintenance costs.

History
The development of condominium and
cooperative housing arrangements accelerated
with increasing costs of real estate, inflation,
increased urbanization, and population growth.
Until the 1960s, the condominium as a separate
form of ownership was relatively unknown in
the United States. The development of condo-
miniums was hastened when the FAIR HOUSING
ACT OF 1968 (42 U.S.C.A. § 3601 et seq.) author-
ized the use of mortgage insurance, established
under the National Housing Act (12 U.S.C.A.
§ 1701 et seq. [1934]), on one-family units in
multiple-family structures.

Advantages
Some advantages of cooperative or condo-
minium ownership are ownership interest in the
premises; sharing high building site and mainte-
nance costs; INCOME TAX deductions for the
interest and taxes paid by individual owners;
decreased risk of personal liability of the various
members; and increased choice of location,
since high real estate costs frequently preclude
individual housing on expensive sites.
Condominium Ownership
An individual who purchases a unit in a con-
dominium receives title to such unit in fee sim-
ple, owning it outright. The owner has all legal
rights incident to ownership, including the right
to sell, absent a RESTRICTIVE COVENANT limit-
ing its use.

Title to a condominium also encompasses ownership of the land and common areas with the remaining unit owners. The individual owner has certain rights, such as use of the common areas, and certain obligations, such as paying his or her share of the expenses incurred for maintenance or improvements of the common
areas, regardless of whether the individual owner approves of the upkeep or improvements.
The size of the share of operating, maintaining, and improving costs of a building and common areas to be borne by an individual unit owner depends on the size of that owner’s unit, usually
measured by the number of rooms in the unit.
The three basic instruments used in the purchase of a condominium are a deed to the unit;
a declaration of condominium; and the bylaws
of the condominium association, the membership of which is comprised of the units’ owners.
An individual buying a condominium receives a deed, which must be duly recorded in
the appropriate county office. Such deed ordi-
narily describes the individual unit, the building
in which the unit is located, and the property
upon which the building is constructed. Gener-
ally it will also embody all limitations or restric-
tions imposed on the use of the unit and any
other details agreed upon by the purchaser and
seller. The deed cannot contain any provision
that is contrary to the rules of the condominium
or declaration of condominium.

The declaration of condominium is the offi-
cial record of the owner’s rights and duties pur-
suant to receiving title to the condominium. It
also states precisely what portions the owner of
a unit owns and must maintain. State statute
prescribes what must be included in the declara-
tion of condominium. These requirements vary
from one state to another, but a declaration of
condominium must ordinarily contain the fol-
lowing: (a) a legal description of the land and
buildings of the condominium, which is essen-
tially the same information contained in the
deed; (b) a description of each unit, including
the address, size, number of rooms, and exact
location within the building; (c) a description of
the common areas and any restrictions upon the
use thereof; (d) the pecuniary worth of each unit
of the condominium and of the land under it, as
well as the percentage of shares in the common
areas assigned to each unit owner, usually based
upon the number of rooms in his or her unit;
(e) the number of votes assigned to each unit.
The declaration of condominium must also
state the procedure for making decisions con-
cerning repairs, improvements, and similar
costs, as well as provisions for amendment of the
declaration or for ending the condominium
arrangement. The number of votes assigned to
each unit owner is in proportion to that owner’s
percentage share. A declaration must also provide
the procedures for owners’ payments of fees and other costs and sanctions imposed for failure
to pay them.

Condominium unit owners must adhere to
the regulations set forth in the bylaws. The
bylaws of a condominium—the rules and regulations
by which the condominium association
governs itself—are generally drafted by the
developers of the condominium or the original
purchasers of the individual units.
The bylaws ordinarily establish procedures
for electing the officers or board members of the
condominium association, conducting meetings,
and handling routine building maintenance
and insurance for the common areas.
They prescribe any restrictions that may be
imposed on the sale of individual units and
penalties for violation of the rules.
A condominium unit may be purchased for
cash; however, the more common procedure is
for a mortgage to be obtained to help finance it.
Since each unit is owned individually, if an
owner defaults on mortgage payments or property
taxes, no other unit owner is liable.

Cooperative Organization
A cooperative can be created in a number of
ways:
1. Corporate organization. The most common
type of cooperative organization is its corporate
form. Three documents are required
for the formation of a corporate cooperative:
a corporate charter or certificate of incorporation;
bylaws; and a proprietary lease or
occupancy agreement. These three instruments
together constitute the contract
between the individual owners and the corporation.
The relationship of the unit owners
to the corporation is such that they are
tenants as well as shareholders. Corporate
financing is ordinarily accomplished by a
single mortgage executed by the corporation,
which covers the entire project. Since
separate mortgages on the individual units
are uncommon, occupants are dependent
upon the financial stability of their fellow
occupants.
2. Co-ownership in joint tenancy. In a JOINT
TENANCY, title to the premises vests in all of
the co-owners as joint tenants, which means
that they have an undivided interest coupled
with a RIGHT OF SURVIVORSHIP. Such an
arrangement includes provisions for exclusive
occupancy of individual units, vested in
designated co-owners. This type of plan is
not often practicable, since there must be
four unities in a joint tenancy: time, title,
interest, and possession.
3. Tenancy in common. The occupants own the
entire project collectively as tenants in common.
Each tenant is given the right to
occupy exclusively a specifically designated
unit. A TENANCY IN COMMON differs from a
joint tenancy in that each tenant owns an
undivided portion; however, the portions
are not necessarily equal. In addition, each
tenant has the legal right to dispose of his or
her undivided share or a portion thereof by
deed or by will. Various covenants are
employed to enforce the financial obligations
in maintenance and operation by the
co-tenants.
4. Business trust. In a BUSINESS TRUST or Massachusetts
trust, title to the entire premises
vests in the trustees of the trust. Certificates
of beneficial interest are issued to the individual
tenants, and each beneficial owner is
assigned an exclusive right of occupancy of a
specific unit under a proprietary lease.
Each tenant-shareholder may deduct on his
or her federal income tax return a proportionate
share of the interest that the cooperative corporation
has paid upon its blanket mortgage, so
long as the corporation does not obtain in excess
of 20 percent of its gross income from sources
apart from its tenant-shareholders.

FURTHER READINGS
Barton, Stephen E., and Carol J. Silverman, eds. 1994. Common
Interest Communities: Private Governments and the
Public Interest. Berkeley: Univ. of California Press.
Hyatt, Wayne S. 2000. Condominium and Homeowner Association
Practice: Community Association Law. 3d ed.
Philadelphia, Pa.: American Law Institute-American
Bar Association, Committee on Continuing Professional
Education.
Rohan, Patrick J. 1999. “Preparing Community Associations
for the Twenty-First Century: Anticipating the Legal
Problems and Possible Solutions.” St. John’s Law Review
73 (winter): 3–42.
Thomsett, Michael C. 1988. How to Buy a House, Condo, or
Co-Op. Mount Vernon, N.Y.: Consumers Union.
Trigiani, Lucia Anna. 2002. Reinventing the Rules: A Step-By-
Step Guide for Being Reasonable. Alexandria, Va.: Community
Associations Press.

CROSS-REFERENCES
Community Property; Lease.