With homeownership comes great responsibility. For co-op and condo residents, part of that responsibility means sorting through the seemingly mile-high stacks of documents handed to you before, during and after the purchase process begins. Those documents can be confusing, especially for first-time buyers. Becoming familiar with each piece of paper and what it means is an important part of that responsibility that comes with homeownership, and that knowledge can save a lot of time and grief down the road.
Start at the Beginning
So what are the main governing documents of co-op and condo buildings? Each has two primary governing documents. For the co-op, “Those are the by-laws of the cooperative corporation and the proprietary lease between the corporation and each shareholder,” says attorney Adam Leitman Bailey of the Manhattan-based firm Adam Leitman Bailey, PC, and author of Finding the Uncommon Deal. “In a condominium, the two primary documents are the condominium declaration and the by-laws of the condominium. In addition, both co-ops and condos have Rules and Regulations, sometimes called House Rules.”
The proprietary lease “creates a landlord-tenant relationship between the cooperative and its shareholders and mostly governs maintenance and repair obligations as well as other issues affecting apartments such as permitted uses, subletting, alterations and transfers,” says attorney Stephen M. Lasser a partner at the Manhattan-based law firm of Barton & Plotkin, LLP. “The bylaws mostly cover issues of corporate governance such as elections and meetings of the shareholders and board of directors, and the scope of the board’s powers. The bylaws also usually contain some provisions relating to shares and apartment sales and transfers.” Bylaws in condominiums serve the same purpose.
Lasser also notes that co-ops will have a certificate of incorporation, the document filed with the New York Secretary of State to form the cooperative corporation. This document will contain the basics about the co-op such as the name of the corporation, the purposes for which the co-op was formed, the number of shares to be issued and the address of the cooperative corporation.
In a condominium complex, “The declaration is loosely analogous to a co-op’s proprietary lease in that it defines and governs the rights and obligations of the condominium association and its unit owners relating to the owners’ use of their units and the common areas,” Lasser says. The declaration is recorded with the county clerk’s office in the county where the condo is located. The document is then “incorporated by reference into the unit owners’ deeds,” he adds. “As a result, when a unit owner takes title to his or her unit, he or she is agreeing to be bound by the terms of the declaration.”