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GUIDE TO CO-OP APARTMENT IN HAWAII

HOA = Homeowners Association (condos, townhomes, & PUD's or CPR's have these) co-op = Cooperative (a type of ownership of a condo whereby owners own one share of stock) 

Cooperatives are corporations. The co-op corporation owns the building and (usually) the land it sits on. The corporation makes mortgage payments and pays taxes, just as the owner of a house makes mortgage and tax payments. Cooperatives comprise roughly 75% of Manhattan's housing stock.

When you buy an apartment in a co-op, you're buying shares of stock in the corporation. (In other words, when you buy a co-op apartment, you're not buying real estate at all, you're buying shares. The term 'real estate' is used loosely as an abstraction to describe apartments in any form.) The number of shares you receive is a function of the apartment's attributes (size, floor, views, and so forth). Along with the shares you receive comes a proprietary lease that entitles you to live in a particular apartment.

Note: In Hawaii, at Atkinson Towers, Inc., when you buy into this co-operative, you get one (1) share of stock, and it doesn't matter (size, floor, view, and so forth) which apartment is covered by the Proprietary Lease.

Like any other corporation, the cooperative housing corporation is governed by a board of directors that is elected by shareholders. The board is usually comprised of an odd number of people, typically 5, 7, or 9. Depending on the by-laws, board terms usually run from 1 to 3 years. Every year, shareholders receive financial statements that discuss the building's operations and overall physical and fiscal health. Cooperative corporations are governed by the same law as any other business corporation.

The rights and responsibilities of shareholders and board members are detailed in several important documents: the offering plan (prospectus) and amendments, by-laws, and the proprietary lease.

The offering plan (or prospectus) is a legal document that must be filed with the state attorney general whenever securities are offered for sale. The 'securities' in this case are shares of co-op stock; for condominiums, securities are common interest allocations. The prospectus outlines the terms of sale and the specifications of the property being sold. The prospectus is often amended several times before any shares are actually sold. Once the conversion process is complete, the sponsor is required to amend the prospectus every year, informing shareholders of the sponsor's and building's financial health.

By-laws are the rules by which a co-op or condominium conducts its activities. By-laws can be amended with a two-thirds majority vote by shareholders. The co-op or condo 'house rules' are the rules by which individual shareholders and residents must conduct themselves. House rules can be amended by a simple majority vote.

Specific only to co-ops, the proprietary lease details the rights of a shareholder to use his or her apartment. Changes to a proprietarty lease typically requires a two-thirds majority vote by shareholders.

Whether you are thinking of buying, selling or financing real estate I'd love to hear from you!

Elena Roud your personal Real Estate Consultant

for Life!

 

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