We have taken a bit of a hiatus from posting as real world work has kept us busy. We will endeavor to keep the blog better updated.
When is an association neither a condominium nor homeowners association? When it is cooperative association! You do not see many coops in west Tennessee, but there are a few. Coops are much more common in the northeast. A cooperative association is a third way for a group to own real property in common to ensure for its maintenance. Since it is not a condominium, it is not governed by the Tennessee Horizontal Property Act or the Tennessee Condominium Act.
If you were to stand outside a coop and look at it, it would physically look much like a condominium or apartment. You have a multi-tenant building that is divided into various units that are occupied separately by different people. In a condominium, each Unit is defined by the Master Deed and each Unit is separately owned by the Unit Owner. Not so in the coop. In a coop, the underlying real property, the building, and the individual Units are all owned by the association. The association then leases individual units out to members of the association. The individual members do not own their unit. Instead, they are issued stock in the association. It should be remembered that the association is a corporation. Instead of being a non-profit corporation (like is the case for condominium and homeowners association), the association is formed as a for-profit corporation. This means that the association may issue stock. The members of the association in the coop, then are stockholders. Instead of owning a unit, a member of a coop owns stock in the association. The association leases the member a unit. The coop is governed by a master lease which sets out the various rights and responsibilities of the association and the member regarding maintenance, insurance, assessments, etc. The association, because it is a corporation, is governed by its charter and bylaws. Finally, the coop may have certain rules and regulations regarding the use of the units.
Consequently, in a coop the relevant documents are the master lease, the charter, and the bylaws (and any rules and regulations. A member of the association owns stock and not the unit. From an owner’s perspective, owning stock rather than a unit becomes interesting when it comes to financing a purchase. One does not get a mortgage on stock. Financing is available, but it works differently with regards to coops.
Because of the structure of the coop, the association has more bookkeeping responsibilities. First, it must manage the maintenance of the structure like a condominium. Second, unlike a condominium, it must address the leasing of units to its members. Lastly, from a governance standpoint, the association must keep records regarding the ownership of its stock.
There is nothing inherently wrong with coops. As noted above, they are much more common in the northeast. They are not preferred in west Tennessee, but there are a few here.