What Is a Housing Cooperative?

A housing cooperative is formed when people join together to own and manage the building in which they live. A cooperative is membership-based. Individuals who wish to become members purchase shares in the legal entity that owns the property, in this case, Melrose Terrace, Inc. Purchase of shares entitles the member an exclusive right to reside in a specific unit, which is established through an occupancy agreement or proprietary lease.

The cooperative is operated for the benefit of its members by an elected board of directors. Members attend shareholders meetings and vote to direct the affairs of the cooperative.

Does Melrose Terrace charge monthly HOA dues?

Members of Melrose Terrace pay a monthly fee to fund the operation and maintenance of the cooperative. The charge covers property taxes, insurance premiums, utilities, management fees, maintenance costs, and contributions to reserve funds. The fee amount for each member is determined by the number of shares the member owns. The number of shares associated with each unit is determined by factors such as the size of the unit and the location in the building.

How is financing different for co-ops and condos?

Financing a co-op purchase is similar to financing the purchase of property in other types of buildings. Lenders review and approve both the borrower and the purchase before offering financing. However, not all lending institutions offer loans for cooperative housing. The following are two lending options: National Cooperative Bank and Eileen Burke at Caliber Home Loans.

Do I need homeowners insurance?

Yes, you need an HO-6 policy. Melrose Terrace carries a blanket insurance policy that covers damage to the cooperative's property from fire, water, or other disasters. However, this policy does not cover damage to personal belongings inside your unit.

Can I rent out my unit?

No, Melrose Terrace does not allow subletting. Roommates are allowed with a background check.

How do property tax deductions work for cooperative homeowners?

Cooperative housing residents have the same potential tax benefits as other homeowners, including taking their share of the mortgage interest and real estate taxes as a deduction on Schedule A of their 1040 federal income tax return. Section 216 is the section of the Internal Revenue Code that allows the pass-through of mortgage interest and real property tax deductions from the cooperative housing corporation to the shareholders. You can find more information about it on the IRS website. (From the National Association of Housing Cooperatives, nahc.coop.)

Glossary of terms from the National Association of Housing Cooperatives.