Condominiums and Cooperatives

A cooperative can be created in a number of ways:

1. Corporate organization. The most common type of cooperative organization is its corporate form. Three documents are required for the formation of a corporate cooperative: a corporate charter or certificate of incorporation; bylaws; and a proprietary lease or occupancy agreement. These three instruments together constitute the contract between the individual owners and the corporation. The relationship of the unit owners to the corporation is such that they are tenants as well as shareholders. Corporate financing is ordinarily accomplished by a single mortgage executed by the corporation, which covers the entire project. Since separate mortgages on the individual units are uncommon, occupants are dependent upon the financial stability of their fellow occupants.
2. Co-ownership in joint tenancy. In a JOINT TENANCY, title to the premises vests in all of the co-owners as joint tenants, which means that they have an undivided interest coupled with a RIGHT OF SURVIVORSHIP. Such an arrangement includes provisions for exclusive occupancy of individual units, vested in designated co-owners. This type of plan is not often practicable, since there must be four unities in a joint tenancy: time, title, interest, and possession.
3. Tenancy in common. The occupants own the entire project collectively as tenants in common. Each tenant is given the right to occupy exclusively a specifically designated unit. A TENANCY IN COMMON differs from a joint tenancy in that each tenant owns an undivided portion; however, the portions are not necessarily equal. In addition, each tenant has the legal right to dispose of his or her undivided share or a portion thereof by deed or by will. Various covenants are employed to enforce the financial obligations in maintenance and operation by the co-tenants.
4. Business trust. In a BUSINESS TRUST or Massachusetts trust, title to the entire premises vests in the trustees of the trust. Certificates of beneficial interest are issued to the individual tenants, and each beneficial owner is assigned an exclusive right of occupancy of a specific unit under a proprietary lease.

Each tenant-shareholder may deduct on his or her federal income tax return a proportionate share of the interest that the cooperative corporation has paid upon its blanket mortgage, so long as the corporation does not obtain in excess of 20 percent of its gross income from sources apart from its tenant-shareholders.