Living in a Housing Cooperative
As a cooperative homeowner, you have certain rights and responsibilities. These are outlined in your cooperative's documents, which typically include the Articles of Incorporation, By-Laws, Occupancy Agreement, and Policies & Procedures. As a shareholder, you have a right to elect board members, and to become a board member and/or committee member. You also have the responsibility to pay your monthly charges on time as well as follow the Policies & Procedures of the cooperative.
Here are some commonly asked questions from residents in housing cooperatives:
Do I need homeowners insurance?
Yes, you need a special policy (HO-6), which is similar to renter's insurance. Your co-op generally carries a blanket insurance policy that covers damage to the cooperative's property from fire, water, or other disasters. However, this policy generally does not cover any damage to personal belonging inside your unit. Additional insurance is recommended to cover your personal possessions and for your personal liability in the event of an accident in your home.
How do property tax deductions work for cooperative homeowners?
Co-op 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. The deduction can be substantial, but only if your co-op is able to pass the deduction on to its members (complicated rules apply to co-ops with substantial commercial income), and you itemize your deductions on your tax return. If your co-op is able to pass through the deduction, you should receive notification from them of the amount by January 31st of each year. Section 216 is the section of the Internal Revenue Code that allows the pass-though 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.
Can I rent out my unit?
Some co-ops are generous in allowing subletting, but most cooperatives severely restrict subletting in order to preserve the owner/occupant character of the community. Co-ops that do allow subletting often have restrictions on the length of time for which you may sublet. Be sure to check what the policy of your co-op is. The policy can usually be found in your Occupancy Agreement.
What are my rights and responsibilities as a cooperative member?
As a democratic organization that follows the cooperative principles, cooperatives give you a voice in the operation of your co-op. The rights and responsibilities of shareholders are set forth in the various co-op documents, including the By-Laws, Occupancy Agreement, and Articles of Incorporation. All shareholders are entitled to copies of these documents. You can request them from your co-op's office or from your co-op's management. If the co-op doesn't have a manager, ask the president or secretary.
For more information about Cooperative Housing, visit The National Association of Cooperative Housing at http://www.coophousing.org/