Which statement about cooperatives is incorrect?

Which statement about cooperatives is incorrect?

• A. The owner has two legal relationships—ownership in the cooperative and a lease for the living unit.
• B. The association owns all of the real estate as a not-for profit corporation for most cooperatives.
• C. There are a few cooperatives set up as for-profit entities.
• D. Cooperatives are always owned by developers and never by residents.

Answer: (D)

The fundamental idea here is how ownership works in a housing cooperative. In a co-op, residents don’t own a specific unit outright. Instead, they own shares in the cooperative corporation and hold a proprietary lease that gives them the right to occupy a particular unit. The cooperative, as the legal owner, holds title to the real estate. This structure is typically organized as a not-for-profit corporation, which is why the statement that the association owns all real estate as a not-for-profit is a common and accurate description. Some cooperatives are set up as for-profit entities, but that’s the exception rather than the rule. While a developer may sponsor or control a co-op initially, ownership or control often transfers to residents over time. Therefore, the statement that cooperatives are always owned by developers and never by residents is not correct.

The fundamental idea here is how ownership works in a housing cooperative. In a co-op, residents don’t own a specific unit outright. Instead, they own shares in the cooperative corporation and hold a proprietary lease that gives them the right to occupy a particular unit. The cooperative, as the legal owner, holds title to the real estate. This structure is typically organized as a not-for-profit corporation, which is why the statement that the association owns all real estate as a not-for-profit is a common and accurate description. Some cooperatives are set up as for-profit entities, but that’s the exception rather than the rule. While a developer may sponsor or control a co-op initially, ownership or control often transfers to residents over time.

Therefore, the statement that cooperatives are always owned by developers and never by residents is not correct.