They’re the smallest pieces of the co-op puzzle. The one item without which the whole endeavor could not function. Just like in a Fortune 500 corporation, the shares in a co-op reflect value, and can be highly sought-after prizes—depending, of course, on the exclusivity of the address. But for all the talk of shareholders and shares, what do these items really represent, and how do they function? Even co-op owners themselves are sometimes unsure about exactly what it means to own shares, and how those shares are allocated.
Very simply put, shares represent portions of stock in a corporation. This distinction is what sets a co-op apart from its real estate cousin, the condo. With a co-op, the resident owns shares in the corporation that owns the building, explains attorney Gail Miranda Schmidt of the firm Milbank Tweed Hadley & McCloy. There is a long-term proprietary lease that gives individuals their rights as a shareholder in the company and as a tenant in the apartment itself.
“In a condo, you actually own the real estate,” Schmidt says. “You own a percentage of the underlying building, and a portion of the common elements. You get title insurance. You’re taxed as an individual. You physically own the box you bought.”
Or, as attorney Diana Lipsig of Pisapia & Lipsig in Manhattan puts it, “In a co-op, it’s a community. In a condo, it’s like everyone has their own little fiefdom.”
While condo owners receive four walls and a roof, co-op shareholders receive actual certificates of stock, although they may only catch a brief glimpse of them at closing. “The bank holds the certificate, and the owner does not see it again until he or she pays off the security agreement,” says attorney Robert Tierman of the Manhattan-based law firm Litwin & Tierman.