Building types
Standard co-op
The ordinary New York City cooperative: you buy shares in a corporation and receive a proprietary lease to occupy a specific apartment.
What is a standard co-op and how does a co-op closing work?
Quick Answer
What is the property interest, legally?
- The purchaser buys shares in a cooperative corporation and takes a proprietary lease to the unit
- Shares are personal property, so the interest transfers by stock certificate and lease assignment rather than by deed
- Nothing records in ACRIS, so the co-op lien search and UCC search replace the real-property title search
- The proprietary lease, bylaws and house rules govern use, alterations, sublets and pets
- A standard owner’s title policy is not issued on a co-op unit
How is a purchase of this type financed?
- A co-op loan is secured by a UCC-1 filing against the shares and by an assignment of the proprietary lease
- The lender, the co-op and the borrower sign a recognition agreement setting each party’s rights on a default
- The building’s financials, reserve level and sublet policy affect whether a lender will lend at all
- Buildings with high commercial income or a land lease draw more lender scrutiny
Which taxes and building fees apply?
- No mortgage recording tax, because there is no recorded mortgage
- NYS transfer tax and NYC RPTT still apply to the transfer of the shares
- The mansion tax applies to residential co-op purchases at the statutory thresholds
- A flip tax set by the building’s documents may apply, payable by whichever party the contract names
What does the approval path look like?
- Contract signed and the board package requirements obtained from the managing agent
- Board package assembled: application, financials, tax returns, reference letters, loan commitment
- Managing agent reviews the package for completeness and forwards it to the board
- Board interview scheduled, then a decision, which the board is not required to explain
- Closing scheduled once approval, the recognition agreement and the lien search are all in hand
Do co-ops have title insurance?
A standard co-op purchase does not use an owner’s title policy, because shares are personal property rather than real property. The protection comes from the co-op lien search, the UCC search against the corporation and the seller, and the stock certificate and proprietary lease themselves.
Can a co-op board reject a buyer without giving a reason?
Yes, within limits. A New York co-op board may decline a purchaser without stating a reason, so long as the decision does not rest on a ground protected by federal, state or city fair-housing law. That is why a complete, well-prepared package matters so much.
Why is there no mortgage recording tax on a co-op?
Because the loan is not a recorded mortgage. It is secured by a UCC-1 filing against personal property, and the mortgage recording tax under Tax Law section 253 reaches recorded mortgages on real property. That is also why a CEMA is available on condos and not on co-ops.
What else should you read before closing?
In the glossary
- Co-op lien searchThe search performed on a co-op purchase covering UCC filings, judgments, liens and unpaid building charges tied to the shares and to the selling s...
- UCC searchA search of UCC filings for security interests in personal property, run against the seller and, on entity deals, against the entity itself.
- Flip taxA transfer fee charged by a co-op or, less often, a condominium when a unit changes hands. It is a creature of the building's governing documents, ...
- Mortgage recording taxThe New York tax due when a mortgage is recorded, computed on the new money secured. A CEMA is the standard structure used to reduce the taxable am...
- Mansion taxA New York State tax paid by the buyer on residential conveyances of one million dollars or more, graduated upward through a series of higher price...
- Transfer tax (RPTT and NYS)Taxes on the conveyance itself, one City and one State. Rates step up at higher prices, and who pays is set by custom and then confirmed by the con...
Questions this raises
- What is title insurance?Title insurance covers defects in a property's past: old liens, recording errors, forged deeds, undisclosed heirs. How the coverage works in New York.
- What do I need to bring to a closing in NYC?Photo ID, funds in the form the agent instructed, a checkbook for adjustments, and every signer. The New York City closing checklist for buyers and...
- What documents do I sign at closing?Note, mortgage, title affidavit, settlement statement and transfer tax returns for buyers; deed and releases for sellers. What each document actual...
Building types
- HDFC co-opAn affordable cooperative formed under Article XI of the Private Housing Finance Law, with income caps on purchasers and usually a restricted resal...
- Land-lease co-opA cooperative that owns its building but leases the ground beneath it from a separate landowner, on a lease with a reset schedule and an expiry date.
- Sponsor co-op unitAn unsold share allocation still held by the building’s original sponsor, sold under the offering plan rather than through the ordinary board process.
- CondopA building split into two condominium units, one commercial and one residential, where the residential unit is owned by a cooperative corporation.
- Standard condoA New York City condominium unit: real property conveyed by deed, recorded in ACRIS, with an undivided interest in the common elements.
The statute itself
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Legal Disclaimer: This page is general information about New York practice. It is not legal advice, it does not account for the terms of any particular contract, building or transaction, and reading it does not create an attorney-client relationship. This is attorney advertising. Prior results do not guarantee similar outcomes.