A co-op apartment or a housing cooperative is a unit in generally a large building that is leased exclusively to the person who purchases it. Buying a co-op apartment is different than buying a house. Instead of actually buying the property where you live, what you are doing is buying into a corporation, usually a limited liability corporation (LLC) that owns the building. Once you purchase these shares, you have an apartment that you and family get to live in, but renting that apartment out, or doing anything illegal in the eyes of the corporation (like having too many occupants) can land you in trouble.

Your co-op apartment, and every other apartment in a building, is subject to the bylaws the corporations establishes, provided these aren’t in conflict with state law. The board can have deciding power over whether or not you can buy a co-op apartment, and may also have the power to deny or approve your right to rent that apartment. They can often turn down any tenants you wish to sublet your apartment to, if their tenancy would somehow conflict with co-op rules, and some co-op boards can be fairly picky and deny without cause your proposed rental of the apartment to any tenants they deem unsuitable. The board also must approve any person to whom you wish to sell your co-op.

Co-op apartments were thought an excellent solution, particularly in New York City, to the many owners of apartment buildings who wanted to get out of the rental market. New York City has some of the strictest rent control laws in the US, and many apartment building owners were just not making the money that was enough incentive to continue operation of a building. Yet there weren’t that many single buyers who could or desired to purchase large apartment buildings. By individual tenants forming a partnership in which each member owned shares in a building, and owned the right to occupy a specific part of it (an apartment), people could join together to purchase their building, often getting slightly lower interest rates and prices than they would if they purchased an apartment in a non co-op building.

Of course this idea didn’t always work well. People who paid very low rent due to rent control were forced out of buildings that were turned into co-ops if they couldn’t afford to purchase into the corporation. You had to have the money, generally to pay for a down payment on your apartment, and to make the payments that would be required thereafter. Moreover, many co-op apartment owners also have to pay fees analogous to those that might be paid by members of a home owner’s association, in order to keep the building and any of its grounds maintained properly.

In some ways, the owner of a co-op apartment is still like a renter. Large buildings frequently have maintenance people on payrolls to help fix basic problems in the building. The co-op also makes decisions through the board, and by each member voting on when to conduct routine maintenance like painting or re-carpeting common areas. If your furnace or plumbing goes out, just like a renter, you’d call the maintenance person. Individual shareholders may have the right to paint or redecorate their own living space, provided they don’t do anything that would not conform to co-op laws.

Though co-ops tend to be cheaper to buy, they can also be harder to sell. Much depends upon how good the board is, how restrictive their rules are regarding renting or subletting, and the degree to which the co-op keeps up on maintenance.